Market Overview – Morning Express

E-mini S&P (March) / NQ (March)
S&P, yesterday’s close: Settled at 4303.75, down 64.25
NQ, yesterday’s close: Settled at 14,005.50, down 222.50
Fundamentals: U.S. equity benchmarks are battling to hold a constructive path as the week kicks into high gear. The Russia-Ukraine conflict will continue to evolve and have a large impact. Corporations, such as Apple yesterday, are shedding association with Russia. Many commodities are surging on supply concerns in the region. Crude Oil has reached above $111, trading to the highest level since August 2013 and Wheat is limit up at the highest since March 2008. Market participants eagerly await Fed Chair Powell’s congressional testimony at 9:00 am CT. In his prepared remarks, he said the committee is still on track for liftoff later this month, but the conflict in Ukraine has made their outlook “highly uncertain”. Also, the hawkish St. Louis Fed President Bullard is expected to speak at 8:30 am CT. The Fed’s policy decision is two weeks out. Yesterday, the odds of a 50-basis point hike were completely priced out, and although a 25-basis point move has a 92.5% probability today, 50 has reemerged with a 7.5% chance. ADP Payrolls for February came in stronger than expected at 475k versus 378k, but January’s abysmal loss of 301k jobs was revised to a gain of 509k. Yes, ADP made an 810k jobs revision. We would be looking into the context of this if ADP still really mattered. In fact, this is more in line with the official Nonfarm Payrolls read for January at 467k. Next up is a pivotal EIA weekly petroleum report with Crude now tapping $112 as we write.
Technicals: Yesterday, we held our more Bullish Bias, but we were also very clear that we it was not an invitation to chase price action. Furthermore, we added that the move in Treasuries signals a volatile session ahead. If you were patient and awaited a test into major three-star support in the S&P (NQ was not hit), there was ample opportunity to make money. Although we remain upbeat, the bounce was less enthusiastic than we would like, and we cannot ignore the failure at major three-star resistance. This tells us such chop is likely to drag out a bit and therefore we will dial back our Bias to cautiously Bullish. For both the S&P and NQ, our momentum indicators align to create our Pivots and point of balance as detailed below. To the downside, we adjusted or waves of major three-star support in the S&P to now … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (April)
Yesterday’s close: Settled at 103.41, up 7.69
Fundamentals: Houston, we have a liftoff. Crude Oil ripped higher through yesterday after the IEA announced it will release 60 million barrels from reserves, 30 million of which will come from the U.S. I suppose this is the type of environment one could justify releasing reserves, but it is wrong to think it will actually subdue this violent rally. The IEA and U.S. are exhausting ammo within a market that has gone parabolic. Russia has advanced into Ukraine and as the conflict drags, there is also thought that such coordination within the IEA could pave the way for sanctions on Russian Oil, another bullish factor. At the end of the day, it is simply another policy move that we strongly disagree with, but one President Biden wanted to laude at last night’s State of the Union. In fact, he praised the move within his opening remarks. Adding a tailwind to prices is last night’s private API survey which printed a headline draw of 6.1 mb of Crude, when a build of 2.7 mb was expected. Gasoline stocks fell by 2.5 mb and Distillates grew by 0.400 mb. Importantly, API has inventory levels at Cushing falling by another 1 mb, signaling how tight the physical market is. Expectations for today’s official EIA report are +2.748 mb Crude, -1.375 mb Gasoline, -1.726 mb Distillates.
This morning, OPEC+ quickly agreed to add 400,000 bpd in April. Yesterday, data showed compliance with the production cuts was at 136% in February, up from 132% in January. We cannot emphasize enough that these are the bullish fundamentals that brought Crude to $90. Simply, OPEC+ cannot hit its production targets, U.S. is not adding production, yet the IEA is spending from its savings account.
Technicals: We really do not have any major three-star resistance levels nearby. The market has gone parabolic and trying to define resistance is a fool’s errand. We now see a range from … Click here to get our (FULL) daily reports emailed to you!
Gold (April) / Silver (May)
Gold, yesterday’s close: Settled at 1943.8, up 43.1
Silver, yesterday’s close: Settled at 25.541, up 1.175
Fundamentals: Gold and Silver finished strongly yesterday but have come in a bit through the overnight. My partner Phillip Streible, our Chief Market Strategist, and I were speaking yesterday about the run in the metals and one thing we could not ignore is how such moves in precious metals can create FOMO among clients. Our largest concern here is the rally sucks in the bulls, only to get smacked down by a Fed narrative that quickly got ‘too less-hawkish’ and the potential of a strong jobs report Friday. For these reasons, traders must remain nimble, Fed Chair Powell testifies before Congress today at 9:00 am CT. In his prepared remarks, he said the committee is still on track for liftoff later this month, but the conflict in Ukraine has made their outlook “highly uncertain”. Also, the hawkish St. Louis Fed President Bullard is expected to speak at 8:30 am CT. Again, traders must stay nimble during these times and prepare themselves for Nonfarm Payroll Friday. It is notable that today’s private ADP survey was strong.
Technicals: Price action remains constructive, but we cannot ignore the overhead struggles; there is clear supply. Do not mistake us for being negative, we remain cautiously Bullish in Bias. Still, Gold is repairing some damage from last Thursday’s reversal and Silver has yet to clear rare major four-star resistance at 25.55-25.88. Look for price action to battle at and above our Pivots, that align with our momentum indicator, to create a point of balance at …Click here to get our (FULL) daily reports emailed to you!
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