E-mini S&P (March) / NQ (March)
S&P, yesterday’s close: Settled at 4275.25, up 106.50
NQ, yesterday’s close: Settled at 13,764.75, up 467.75
Fundamentals: U.S. equity benchmarks ‘staged’ a terrific rally yesterday, a steady grind from start to finish. With price action slipping overnight, it is a reminder of the broader environment; we cannot get caught up in one day’s action. U.S. CPI for February is due at 7:30 am CT and yesterday’s strength was led by short-covering, bottom feeding, and momentum algos through the lowest volume in a week. You might be wondering if we have changed or tune. Overall, our intermediate to longer-term bullish expectations have not, but Monday’s continued weakness through critical levels of support tells us we are not out of the woods yet.
Although today’s CPI data may not be as critical as anticipated just a couple of weeks ago, it will still have a direct impact on markets today and the Federal Reserve’s rhetoric tomorrow. Expectations are for Core CPI, excluding food and energy, at 5.9% YoY and +0.5% MoM, each down one tenth from January’s read. The headline print will exude the rise in food and energy that began in February. It is expected at 7.9%, increasing from 7.5% in January to the highest during this cycle. Also, a MoM increase of +0.8% would mark a continued trend in strengthening inflation. If this number is hotter than expected, it could certainly spook risk assets because March’s dataset is likely even hotter. However, a cooler print could allow the Federal Reserve to catch their breath next week.
The ECB held their policy decision this morning and came across more hawkish relative to recently eroded expectations due to the Russia-Ukraine conflict. Most notably, the bank said they will begin winding down their purchases under the APP faster than expected, from $40 billion in April, to $30 billion in May, and $20 billion in June, signaling the program would be shut down in the third quarter. Additionally, they dropped wording that rates could be lower than currently.
Technicals: A soft tape overnight has turned into weakness at the onset of U.S. hours and price action is retesting the critical 4212-4222 level in the S&P. Now, there are multiple layers of support between here and settlement levels from Monday and Tuesday for both major indices, but a clear break below 4212-4222 will confirm the bears have the edge. At the end of the day, strong levels of resistance were achieved during yesterday’s low volume session and those who want to buy have exhausted their ammo. Furthermore, as mentioned above, the technical breakdown on Monday was a reminder this market is not out of the woods. In order to stabilize, we must see the S&P regain and hold decisively out above … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (April)
Yesterday’s close: Settled at 108.70, down 15.00
Fundamentals: Crude Oil finished down $15 yesterday, or 21% as a crowded trade quickly became liquidated. Iraq’s Oil Minister said that the country can increase output if OPEC+ requires and rumors the UAE was proposing to increase output all cratered a soft tape. However, price action quickly rebounded as it became known the UAE did not discuss such a proposal with other OPEC+ allies and Iraq’s Minister believes the market is well-balanced. We are welcoming this weakness, let the market release some froth, because at the end of the day, OPEC+ cannot bring the required production online! Members are at 135% (over)compliance for a reason. The tape has rebounded from strong technical support and quickly achieved near-term oversold conditions, but underpinning the move is also no progress on Russia-Ukraine diplomatic talks.
Technicals: In a perfect world, we all would have had buy limits at 103.66, a quarter above the March 1st gap settlement. That wave of weakness happened quickly and did not give bulls, like us, much of an opportunity to capitalize near 103.41, nonetheless major three-star support at 105.18-105.51. These will remain strong levels of support that make sense to take defined risk against. The market is well off these marks though, testing three significant levels of overhead resistance. The first aligns with … Click here to get our (FULL) daily reports emailed to you!
Gold (April) / Silver (May)
Gold, yesterday’s close: Settled at 1988.2, down 55.1
Silver, yesterday’s close: Settled at 25.816, down 1.079
Fundamentals: Gold and Silver are in rebound mode, capitalizing on a risk-off move due to no progress in Russia-Ukraine diplomatic talks. The strength also comes despite continued weakness across the Treasury landscape. The U.S. Dollar sold off due to Euro strength on the heels of a more hawkish ECB, described in the S&P/NQ section. U.S. CPI is on deck; those expectations are also discussed in the S&P/NQ section. A hotter than expected number could easily weigh on Gold as it could encourage a more hawkish Federal Reserve next week. However, if such forces added weakness in U.S. equity markets, Gold could garner added safe-haven tailwinds. At the end of the day, we maintain the belief that a more hawkish Federal Reserve would weigh on future growth prospects, making Gold more attractive. At the same time, a cooler number could help underpin longer-term strength, but could cause near-term gyrations if risk-assets rebound.
Technicals: Price action across precious metals is firm and has responded to the levels of support in which it needed to yesterday. Although we see the largest value as a buying opportunity lower, denoted as our rare major four-star support in Gold, to see that in one day would have signaled a much larger-scale failure. For now, look to key support at 1980-1985 in Gold and the previous ceiling in Silver at 25.72-25.88 to help underpin the tape ahead of the weekend. Added buying could be encouraged upon a move out above … Click here to get our (FULL) daily reports emailed to you!