E-mini S&P (December) / NQ (December)
The S&P500, yesterday’s close: Settled at 4297.75, down 52.00
NQ, yesterday’s close: Settled at 14,682.50, down 57.25
Fundamentals: It is a new quarter, a new month, and a fresh start for this market. Price action was slammed into settlement yesterday and bled lower overnight. A circus of events over the last three weeks culminated into the lowest close in the S&P since July 19th. From Quad Witching and quarter-end to the impending Fed taper, deadlock in Congress, Evergrande, soaring energy prices, broad supply chain disruptions, and fears of inflation, it has not been the easiest of markets to navigate. We now look to this fresh quarter; can it get things back on track? The Federal Reserve has well-prepared risk-assets for a reduction in bond purchases. Furthermore, there is a budding argument that depending on how much infrastructure gets passed by Congress, we could see a net reduction in bond issuance relative to Fed purchases. Additionally, we argued for the last two months that rates will rise as Congress gets their act together. In fact, we were right for the complete opposite reason; a key driver in rates was Congress’ complete lack of sanity and the potential of U.S. default. The yield of the 10-year has backed off from its high of 1.56%, earlier in the week, and if Tech is so affected by rates, this signals some decent value for profitable Tech companies with the NQ losing as much as 7% from its high. Although inflation jitters will remain, there is also an argument here the initial shock has been digested. As for supply chains, Bank of America downgraded Kohls yesterday for that reason and the stock lost 12%. However, companies within the space have been lagging since early August; Target is seen as a true leader here and is 14% from its high. All things considered, we believe much of the negativity has been digested, therefore, this new quarter and new month truly bring a fresh start, for now.
Today’s economic calendar brings the Federal Reserve’s preferred inflation indicator, the Core PCE Index for August. This number is typically less volatile than CPI and came in right at expectations YoY at 3.6%, however, a touch above MoM at +0.3% versus +0.2%. Personal Income was +0.2% versus +0.3% expected, but Personal Spending topped at +0.8% versus +0.6% expected. We now look to ISM Manufacturing at 9:00 am CT, after the final read for IHS Manufacturing PMI at 8:45 am CT. Also, the final read for September Michigan Consumer data is due at 9:00 am CT.
Technicals: Price action is stabilizing from last night’s washout and trading well into positive territory ahead of U.S. hours. Our momentum indicators will bring a point of balance on the session, for the S&P this is 4308-4310 and the NQ it is 14,705; continued action above here will support higher prices into the thick of yesterday’s failure. First key resistance for the S&P is a previous low at 4334.75 and then major three-star resistance comes in above at 4340-4343.75. For the NQ, we look to previously strong support to come back as first key resistance, a sticky pocket, at 14,740-14,765. Above there is major three-star resistance at 14,807-14,829. If price action gets back above those major three-star resistance levels, we could see quite a run into Monday. However, a failure to hold above our Pivots and a dip back below 4300 in the S&P will quickly subdue this early strength and force the bulls to defend a wide range of rare major four-star support at 4275.25-4293.75.
Resistance: 4334.75**, 4340-4343.75***, 4366-4373***
Support: 4275.25-4293.75****, 4260**, 4237***
Resistance: 14,740-14,765**, 14,807-14,829***, 14,855-14,896**, 14,992-15,009***
Support: 14,682-14,699**, 14,630**, 14,530-14,550***
Crude Oil (November)
Yesterday’s close: Settled at 75.03, up 0.20
Fundamentals: A whipsaw session finished higher, but price action has not been able to hold those gains. An early battle against strong major three-star support at 73.58-73.98 was won by the bulls after the newswire said China issued an order to energy companies to ensure supplies at any cost. This reversed Crude Oil from 73.70 and nearly its low of the session to a high of 76.07. However, OPEC+ threw cold water over the rally, saying they are considering options for bringing more Oil to the market at next week’s meeting. While we see more upside, the market is now in a consolidation pattern and digesting recent gains due to the two-sided comments.
Technicals: Price action only briefly stuck its head above a wide range of resistance at 75.45-75.75 that aligns with the selling earlier in the week. However, the heavy lifting was done against major three-star support at 73.58-73.98, aligning with unchanged on the week. We must see Crude Oil continue to hold this mark and consolidate in a healthy manner in order to build for the next push higher.
Resistance: 75.45-75.75**, 76.98***, 80.00***
Support: 73.58-73.98***, 72.45-72.65**, 72.03***
Gold (December) / Silver (December)
Gold, yesterday’s close: Settled at 1757, up 34.1
Silver, yesterday’s close: Settled at 22.047, up 0.562
Fundamentals: Gold and Silver had the day yesterday we have all be waiting for. Here, before the rally, we noted that Silver’s flush on Wednesday may have accomplished the necessary cleansing and that Gold held very well given Silver’s pressures. A quarter-end currency ramp is certainly not rare and that might be what we saw from the U.S. Dollar Index which has retreated about 0.5% from yesterday’s early high. Additionally, Treasuries have stabilized a bit and both the yield of the 10-year and 30-year have retreated from critical technical levels. All of this is supportive for Gold and Silver, and we are beginning to believe the coast is clear. Let us not forget, that swept away in recent weakness, broad market volatility, and other narratives, Gold gained Tier 1 status this summer, and this encourages banks to hold physical Gold.
Technicals: We must begin to be Bullish in Bias at these levels. Silver has rallied from Wednesday’s flush low, and Gold has traded in a stable manner above the August 9-10th action. However, it is very important to note that each is not in the clear and has a tremendous uphill battle due to the damage in recent weeks. The first comes as a trend line from the early September highs and both Gold and Silver are facing that this morning at 1760 and 22.50. We must see Gold battle through here and continue to close above recurring major three-star resistance/support at 1753-1756.4. Whereas Silver must hold major three-star support at 22.02-22.35 at a bare minimum.
Resistance: 1760**, 1768-1770**, 1777**, 1782.8-1784***
Support: 1746**, 1736.9-1737.4**, 1718.5-1722.9**, 1673.3-1698.5****
Resistance: 22.50**, 22.70**, 22.93**, 23.35***
Support: 22.02-22.35***, 20.99-21.25**
You can sign up for a free trial here: https://www.bluelinefutures.com/free-trial