E-mini S&P (March) / NQ (March)
S&P, yesterday’s close: Settled at 4300, down 43.50
NQ, yesterday’s close: Settled at 13,862.75, down 133.25
Fundamentals: Russia-Ukraine tensions are nearing a boiling point, but something is budding below the surface; a path towards less uncertainty. One might think, ‘you got to be kidding me, we could be at the brink of World War III, and you are spinning this as a positive’. In all intents and purposes, Russia has not aggressively rolled tanks into Ukraine and the West’s big bad sanctions were a mere slap on the wrist. Yes, things could quickly take a turn for the worse, as traders and investors we must plan for such. But, define worse? With the S&P slipping as much as 5% from Thursday’s close as tensions mounted, we must remember that markets are extremely efficient. To some extent, a terrible situation is partially discounted, and markets flushed to then find relief in less uncertainties after Russian President Putin announced the breakaway regions. Furthermore, prices ripped momentarily after President Biden announced those sanctions yesterday. Javier Blas of Bloomberg described the West as conducting business as usual with Russia, buying $700 million worth of resources in the 24 hours after Putin signed a decree to recognize the two breakaway Ukrainian territories. The S&P has rebounded by more than 2% from yesterday’s low and the Euro Stoxx 50 by 4.4%. There are certainly signs of a potential relief rally developing and if so this would not be the first time markets overreact to Russian geopolitical tensions, only to leave those negatively positioned in the dust.
At the end of the day, we must remember U.S. equity markets did not begin a correction upon the Russia-Ukraine conflict. The selling began at the onset of the year due to the Federal Reserve tightening monetary policy. In fact, this conflict has eroded the perception of the Fed’s hawkishness, and rate markets are now leaning on a 25-basis point hike in March with a 63.4% probability. At one point, there was a better than 50% probability the Fed would hike 50-basis points at their March meeting. Now, the second 25-basis point hike is projected for May.
Technicals: Broadly speaking, price action remains ugly, but there is reason to believe yesterday’s session provided a near-term and tradable low, at minimum. Two things stood out most. First, although the S&P slipped to an off-hour low of 4250, it did not even spend a cup of coffee there. We find major three-star support at 4260.50-4276.50 to have been defended brilliantly. A retest to a low of 4261.50 was traded just as President Biden spoke and the S&P ripped 1.7%. Another test was defended steadfastly shortly after at 4284. Remember, this 4260.50-4276.50 was the right shoulder of that late January inverse head and shoulders. In our view, we want to be buyers defining our risk with prices out above this level. Secondly, a similar off-hour low took place in the NQ. In this case it flushed below the January low and stayed under for nearly 12 hours. It then ripped a vicious 3.8% and yesterday’s midday retest brought a low of 13,710. The significance being January’s low was 13,706. Again, the groundwork is set for a rally, as long as price action can hold above these significant levels of support. We have taken our Bias from cautiously Bearish late last week, to Neutral yesterday, to now mostly Bullish, barring a hold of these supports. We are eying two levels to the upside in each the S&P and NQ in which price action must clear in order to invite added buying. For the S&P this comes in at … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (April)
Yesterday’s close: Settled at 91.91, up 1.70
Fundamentals: In the same manner we discussed less uncertainties being bullish on equity markets, this is having a negative impact on Crude. President Biden announced sanctions that stopped short of energy markets. In fact, as we noted in the S&P/NQ section, Bloomberg detailed the West as purchasing $700 million worth of resources from Russia since Monday. In fact, the energy landscape is so fickle, nations such as Italy refused to get on board with sanctions that effected the complex. In return, Crude Oil prices are also discounting less geopolitical premium, and yesterday’s technical swing brings headwinds. Furthermore, it seems officials are nearing an Iran Nuclear Deal to bring back exports, something we noted as an event to fade (buy). All things considered, this could create a very buyable flush, given our intermediate to long-term projections.
Technicals: Price action slipped sharply from a session high of 94.95 and marginally settled below what was denoted as major three-star support here yesterday morning at at 92.08-92.25. It was then modified to a Pivot and point of balance in our Midday Market Minute. This level aligns closely with our momentum indicator this morning and will remain such. There are multiple layers of support detailed below, but we do not have a major three-star level until … Click here to get our (FULL) daily reports emailed to you!
Gold (April) / Silver (March)
Gold, yesterday’s close: Settled 1907.4, up 7.6
Silver, yesterday’s close: Settled at 24.311, up 0.319
Fundamentals: Less uncertainties are likely to bring some headwinds to precious metals. The Treasury complex is already exuding such with the yield on the 10-year rebounding from a low of 1.85% to 1.98%. To be frank, we would be happy to see geopolitical premium in Gold dissipate, because we believe Gold can breakout above rare major four-star resistance on the larger thematic Fed backdrop we have been discussing for weeks. There is no major economic data today and make no mistake, headlines still must be watched closely.
Technicals: Our momentum indicators signaled some early exhaustion yesterday. Those tracked lower, now providing a point of balance for both Gold and Silver to hop back over. As long as prices stay above the levels denoted as our Pivots below, we view the bulls as in the driver’s seat on the session. Still, as we said yesterday, we will maintain patience and envision a tremendous buy opportunity in Gold if it were to squeeze longs who chased recent action. This level would be … Click here to get our (FULL) daily reports emailed to you!