Market Overview – Morning Express
E-mini S&P (March) / NQ (March)
S&P, yesterday’s close: Settled at 4464.50, up 70.50
NQ, yesterday’s close: Settled at 14,609.50, up 356.50
Fundamentals: Today’s economic calendar will prove pivotal, and it begins with Retail Sales for January at 7:30 am CT. The consumer fell off a cliff in December, the holiday season, with headline and Core Retail Sales contracting by 1.9% and 2.3%, respectively. To make matters worse, November’s read was nothing special. Today’s data is expected to be driven by strong auto sales. Although this volatile factor would lift the headline number, it is excluded from the Core. Industrial Production for January follows at 8:15 am CT, it too contracted in December. Next up is Business Inventories for December, due at 10:00 am CT. This is a number we are watching very closely as building inventories can be a tailwind to GDP at the onset but can become a huge burden if not sold. In the third quarter, inventories accounted for 2.2% of the annualized 2.3% QoQ growth. Business Inventories in October jumped 1.3% MoM, and then by 1.3% in November. December is expected to jump by 2.1% MoM. If Retail Sales continues to exude an exhausted consumer, these bloated inventories signal a dramatic slowdown in growth around the corner. Aside from poor energy policy boosting Crude Oil and the inflationary impact that wartime can have on some commodities, this expected combination of Retail Sales and Business Inventories is a deflationary event. The Federal Reserve has gotten very hawkish in front of this slowdown. With 150 basis points worth of hikes by December being priced in with an 85% probability and 175 basis points with a 58% probability. There is literally not much more room for the Fed to get more hawkish than they already are. This lays the groundwork for a potential peak in the 10-year yield at what has exactly been our target of 2.00-2.15%. Rounding out the day, the Federal Reserve releases the Minutes from their January meeting at 1:00 pm CT.
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Technicals: Price action at the European open spiked to a new swing high of 4483 in the S&P, making sure to run any stops for those looking to trade short and keep risk tight. Yesterday’s firm finish, at the topside of the session’s range, was no surprise as the 4440-4446 level underpinned the tape. However, a failure to extend and hold higher prices has allowed our momentum indicator to catch up and act as our Pivot and point of balance today at 4456.50. Although decisive action below here will signal exhaustion, the 4440-4446 level sits just beneath. It is important to understand the many tests of this level already have reduced its intraday strength, but it remains paramount on a closing basis. We believe a very decisive close below here and the 200-day moving average at 4438 will open the door to fresh selling and liquidation into the back-half of the week, barring added fundamental news. Similarly, the NQ jumped higher overnight, but failed perfectly at major three-star resistance at 14,655-14,671. The roadmap sets up for the NQ just as it does for the S&P, a close below 14,416-14,483 is likely to encourage added selling. Still, for each, we cannot ignore the layers of support below and this will encourage two-sided volatility. Make sure not to sell into, and in fact we may look for a swing trade long at, major three-star support in the S&P at … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (March)
Yesterday’s close: Settled at 92.07, down 3.39
Fundamentals: Prices across the energy space are rising into U.S. hours, underpinned by massive technical support, the Ukraine-Russia saga, and a strong Retail Sales number this morning. First, and clearly most important, our major three-star level at 90.73-90.97 was pinged perfectly yesterday with a low of 90.66; we say this every day, trust the levels. Overnight, Ukrainian President Zelensky said, ‘we do not see any Russian withdrawal yet’. Additionally, U.S. Secretary of State Blinken said, “we continue to see critical Russian units moving toward the border, not away”. Retail Sales data crushed expectations and signaled that rising gas prices has not exhausted the consumer. With a pulse on the border situation, the focus will shift to inventories. Last night’s API was overall in line with expectations, but what stood out and likely helped buoy the tape was again levels at Cushing. The private survey estimated inventories at the crucial hub to have fallen another 2.382 mb. If confirmed by EIA, this will bring Cushing to levels last seen in September 2018. Expectations for EIA are -1.572 mb Crude, +0.55 mb Gasoline, and -1.463 mb Distillates.
Technicals: Price action is edging higher this morning and the impact of major three-star support at 90.73-90.97 cannot be underestimated. With prices rising through our recurring 92.96-93.50 pocket, it pins the potential of a head and shoulders pattern in the mix with major three-star resistance coming in as the right shoulder at … Click here to get our (FULL) daily reports emailed to you!
Gold (April) / Silver (March)
Gold, yesterday’s close: Settled at 1856.2, down 13.2
Silver, yesterday’s close: Settled at 23.342, down 0.506
Fundamentals: Gold and Silver are firming from yesterday’s pullback. Although today’s strong Retail Sales data is likely to weigh on Gold, re-escalating geopolitical fears have muscled price action higher. As we noted yesterday, Gold is in an uptrend, but there are many ongoing tradable opportunities and Monday’s rally certainly gave us an amazing one. For now, the U.S. Dollar is lower on the session and long-end Treasuries are up; this provides a supportive landscape to the precious metals space. Traders must keep a pulse on headline risks and ready themselves for the release of Minutes from the Federal Reserve’s January meeting at 1:00 pm CT.
Technicals: The path remains as technical as ever, Gold failed at major three-star resistance, the 50% from the entire pandemic move and the November high. As we noted, Gold is in an uptrend and therefore bulls defined the pullback perfectly at our major three-star support at 1837.4-1843, with a session low yesterday of 1845.4. The weekly close will be critical and Gold must hold out above this support level or faces a big failing candle. Silver’s low was also very constructive, holding out above first key support at 23.00-23.08. Silver cannot finish the week below major three-star support at … Click here to get our (FULL) daily reports emailed to you!
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