Market Overview – Morning Express
E-mini S&P (June) / NQ (June)
S&P, yesterday’s close: Settled at 4163.50, down 29.00
NQ, yesterday’s close: Settled at 13,044.00, down 245.00
Fundamentals: U.S. equity benchmarks slipped further overnight, and the NQ traded to the lowest level since May. Monday was another failed rally attempt; indices were slammed after the S&P gained as much as 1% through the opening hour. China is certainly not helping sentiment. Despite a strong slate of economic data for February, released last night, the Hang Seng cratered another 5.7%, marking a dramatic 18.9% bludgeoning just this month. The Shanghai Composite finished down 4.95% mounting a loss of 11.5% on the month. The re-emergence of the virus and Beijing’s zero-tolerance policy are certainly not helping, but the China-Tech crackdown is something that should not come as a surprise to our readers. We have now been adamant for nearly a year to avoid China. KWEB, the China Internet ETF is now down 80% from its peak last February and 37% this month. A meeting between U.S. National Security Advisor Sullivan and Chinese officials yesterday yielded little but is a reminder of the fragility of geopolitics. At face value, both Russia and China deny the former’s request for military aide, such as high-tech drones. China further emphasized, “it is not party to this crisis (Ukraine) and does not want to be sanctioned for it”. The communist nation is trying to stay at arm’s length. Although we cannot trust their intentions, agitating China would mark a severe escalation across the geopolitical landscape.
Do not miss yesterday’s Midday Market Minute.
Early this morning, German and Eurozone ZEW Economic fell sharply at -39.3 and -38.7. Although +10.0 and +10.3 were expected, given that a war is unfolding in the region coupled with rising inflation and a less dovish central bank, one could imagine the six-month economic outlook has been taken down significantly. ZEW also noted a recession is becoming increasingly likely. ECB President Lagarde is expected to speak at 10:15 am CT.
In the U.S. we look to February’s Producer Price Index at 7:30 am CT. Remember, producer prices are a leading indicator for consumer prices. The headline YoY read is expected at 10.0%, a fresh record. We also look to a fresh March NY Empire State Manufacturing Index read at that time. The Federal Reserve begins their two-day policy meeting today, concluding with a decision to lift-off tomorrow at 1:00 pm CT, followed by Fed Chair Powell’s press conference.
Technicals: We are now trading the June contract. Price action is pulling off the worst levels of the overnight, but yesterday’s damage lingers overhead. Still, both the S&P and NQ are decisively below our momentum indicators, marked as our Pivot and point of balance below. They have been below this mark since Friday’s selling through the 10:00 CT hour, and retests have failed. However, a move back above here would help signal some near-term exhaustion to the downside and encourage a consolidation higher. Still, we must see a decisive move intraday and close back above major three-star resistance at … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (April)
Yesterday’s close: Settled at 103.01, down 6.32
Fundamentals: On Friday, we noted the head and shoulders top. In yesterday’s Midday Market Minute, we further said that sustained price action below the 103.41-103.61 mark could get ugly. With China expanding lockdowns, Russian Crude still on the market, and flows of Russian gas through Ukraine to Europe remaining steady, there has been a lack of bids amid technical damage and pure panic from greedy longs. We warned for days to not chase the melt-up, and furthered that notion by highlighting a head and shoulders technical pattern on Friday, but now believe Crude can find balance in the low 90’s if the larger, longer-term narratives hold true. First, a slate of economic data from China was largely robust last night with Industrial Production and Fixed Asset Investment crushing expectations. Although this is ignored now due to the lockdowns, it is a sign of steady growth in the region to couple with Exports. Early expectations for U.S. inventories point to another fall. The physical market remains very tight and supplies at Cushing are hitting the worst in years. PPI this morning will prove pivotal, but if the Fed is not more hawkish than expected, we could see another tailwind due to U.S. Dollar weakness. Patience pays in this environment, do not hesitate to reach out to our trade desk to discuss strategy at 312-278-0500.
Technicals: Crude Oil has fallen precipitously for a day and a half; can it find a point of balance at previously view support at 96.17-96.47? April options expire on Thursday and there is a possibility this helps encourage a flush if 90.00 is breached. However, stability through options expiration could help bring a nice floor and open the door to a fresh rally. Regardless, Crude must close back above… Click here to get our (FULL) daily reports emailed to you!
Gold (April) / Silver (May)
Gold, yesterday’s close: Settled at 1960.8, down 24.2
Silver, yesterday’s close: Settled at 25.298, down 0.0862
Fundamentals: Gold and Silver have fallen sharply along with other commodities as the recent exuberance has turned into panic selling. We have said all along that we think Gold can trade higher this year, but the onset of the Russia-Ukraine conflict will not be the catalyst for breakout. However, it will be the previous policy errors by the Federal Reserve as they are now forced to tighten policy too quickly and erode the potential for future growth. And yes, geopolitics broadly are a tailwind, but we do believe such will be an ongoing undertone and not the major driver of price day-to-day. U.S. PPI came in just a touch below expectations, and Gold does not seem to know what to do initially; it is ticking lower with trend. However, NY Empire State Manufacturing whiffed at -11.80 versus +7.0 expected and this could help buoy the bleeding. Still, it will remain depended on the Federal Reserve’s policy meeting tomorrow.
Technicals: We should have known Gold would plummet overnight after it closed below our 1966.6 level. We say that facetiously. Price action is now testing the old 2011 high which aligns to create rare major four-star support and a level in which we like buying against, within our patient and properly sized narrative of course. There is a lot of damage through today, and traders must understand that such selling can continue. A move back above our momentum indicators will help signal that downside is becoming near-term exhaustion, they come in for Gold and Silver at … Click here to get our (FULL) daily reports emailed to you!
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