Market Overview – Morning Express
E-mini S&P (March) / NQ (March)
S&P, yesterday’s close: Settled at 4381.75, up 78.00
NQ, yesterday’s close: Settled at 14,239.25, up 233.75
Fundamentals: U.S. equity benchmarks notched a terrific session yesterday, underpinned by Fed Chair Powell voicing the plan for a 25-basis point hike in two weeks. All things considered, his Congressional testimony was the Fed policy announcement and the Chairman removed uncertainties. You know our narrative, the market hates uncertainties. The meeting will still provide economic projections, the lauded Dot Plot, and conversation around the balance sheet runoff, but for all intents and purposes it is now a formality. Between now and then, Nonfarm Payrolls is out Friday, and CPI is due next Thursday. These will certainly help develop the Fed’s rhetoric in the coming months and there is a 98.2% probability we see the second 25-basis points at the May meeting.
The Russia-Ukraine conflict will dominate news flow and impact market swings. Although fighting has intensified, as long as it remains contained within the region, markets appear to be agreeing with us; there are less uncertainties. The conflict has been a catalyst for higher commodity prices, and thus inflation expectations, with Crude Oil and Wheat at the forefront. Traders must watch these commodities in order to keep a pulse on the developing narrative. Furthermore, we believe that any retreat in such assets will help underpin strength across the equity space.
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On the economic calendar, Initial Jobless Claims were better than expected, moving lower for the third straight week. Continuing Claims were right at expectations but remain at the lowest level since the 1970’s. Nonfarm Productivity for Q4 was a tenth below expectations at 6.6% and Unit Labor Costs topped estimates at 0.9% versus 0.3%, signaling a bit of wage inflation. Next up is final Services and Composite PMIs at 8:45 am CT, followed by the more closely watched ISM Non-Manufacturing and Factory Orders at 9:00 am CT. Traders want to keep an eye out for Fed speak, NY Fed President Williams is on the schedule at 5:00 pm CT.
Technicals: Yes, we have ramped our Bullish Bias, contingent upon two circumstances that we will detail below. First, yesterday’s strength pins the S&P and NQ up against crucial levels of resistance, but ones that we see bringing a tailwind upon a clear breach. A pattern of higher lows this week has laid a bullish groundwork and as we noted above, we find the near-term fundamentals favorable. Of course, there is clear resistance in the S&P at 4399-4401, but the reason we are outright Bullish hinges more on the positive groundwork. Not only with the S&P but the developing cup and handle pattern within the NQ that can be viewed from two standpoints. Furthermore, the NQ is attempting to clear trend line resistance from the January 4th peak. Our targets are detailed as major three-star resistances below. We will maintain this outright Bullish Bias as long as the S&P holds above major three-star support at … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (April)
Yesterday’s close: Settled at 110.60, up 7.19
Fundamentals: Crude Oil slipped sharply from its overnight peak of 116.57, the highest since September 2008, on news officials are close to an Iran Nuclear Deal. There is a quoted comment going around that describes talks perfectly, “the principle is that nothing is agreed until everything is agreed. Some issues yet remain.” The Iran Oil Minister said the country can reach peak output of 3.8 mbpd within two months of a deal being reached. They currently produce 2.4 mbpd. This sharp reversal will leave trapped longs, hedges, and tremendous near-term damage if we close below some of the support levels detailed in the Technical section below. We are not calling a long-term top in Crude Oil yet and believe there is a larger narrative outside of the Russia-Ukraine conflict, but the conflict has pulled forward expected market gains and this could provide a near-term top.
Technicals: We have turned completely Neutral and find it reasonable to expect further downside upon a breach of critical support. Crude Oil not only reversed more than $10 from the overnight high, but as it barreled lower, it stopped on a dime at the .382 retracement from the overnight high, back to the 90.06 low from 2/25. We always say that if markets can hold above the .382, they can hold an uptrend and inversely when below, a downtrend. The bottom of today’s range will be defined by this 106.44 and a break below here brings cause for lower action. The upside this range is major three-star resistance at … Click here to get our (FULL) daily reports emailed to you!
Gold (April) / Silver (May)
Gold, yesterday’s close: Settled at 1922.3, down 21.5
Silver, yesterday’s close: Settled at 25.19, down 0.351
Fundamentals: Gold and Silver have been holding ground constructively but are still struggling to extend their ranges higher. Treasury markets slipped sharply from Tuesday’s high and have certainly weighed on the precious metals landscape. Jobless Claims data was strong this morning with Q4 Unit Labor costs signaling some wage inflation pressures. With all that said, the real catalyst for the latest leg of Gold’s surge is of course the Russia-Ukraine conflict. It is of the utmost importance to remember that Gold is not going to breakout due to the conflict but instead breakout due to the impact of the aftermath, raising the likeliness of stagflation around the globe and a slower Fed tightening cycle. Stay patient and manage your downside in the meantime.
Technicals: Prices of Gold and Silver are stable and holding out above first key support. Gold stalled overnight at first key resistance at 1943.8 and Silver continues to struggle at rare major four-star resistance at 25.55-25.88. Look for construction at and above our momentum indicators at … Click here to get our (FULL) daily reports emailed to you!
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