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E-mini S&P (December) / NQ (December)

S&P, yesterday’s close: Settled at 3625.25, down 28.00

NQ, yesterday’s close: Settled at 10,984.50, down 117.00

Fundamentals:  The NQ set a new bear market closing low yesterday and a fresh low overnight. While higher rates have brought a steady bludgeoning to tech, ongoing unease within the semiconductor space has added headwinds. AMD issued a revenue warning on Friday, plunging -13.9%, and Asian supplies are now feeling the squeeze after the White House issued curbs on technology companies doing business with China.

This is not all tech, though, Friday’s strong jobs report, coupled with tepid labor force participation, is in stark contrast to the Federal Reserve’s objective and sparked a dramatic selloff. The Fed wants economic pain that subdues demand and thus reins in inflation, but it starts with a loosening labor market. There are structural problems within the labor market, this is undeniable, but the Fed also would not need to force such pain if inflation itself showed signs of leveling off. This builds into Thursday’s critical CPI report, and we noted last week that we welcome lower prices in order to skew risks to the upside as anticipation mounts. The outcome of Friday’s Nonfarm Payrolls data revved Fed rate hike expectations to new cycle highs, again moving the goalposts and forcing markets to recalibrate. There is now an 80% probability the Fed hikes by 75bps in three weeks, but this was well expected. It is the second 75bps hike in December that has forced unease, as it has emerged to nearly a 30% probability. This is what we must keep a pulse on, and we have been here before. Now that expectations have become more skewed, it opens the door to a more favorable reaction to CPI, even if the data itself and future expectations remain elevated (within reason).

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NQ (December)

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Crude Oil (November)

Yesterday’s close: Settled at 91.13, down 1.51

Fundamentals:  If there were ever a moment when the near-term narrative could shift, reversing price action, this is now. Last week’s monumental rally for Crude Oil may have gotten a bit ahead of itself. Even we have called the White House’s SPR release irresponsible and forecast bullish tailwinds because of it in the not-too-distant future, but the reality is they are not done, and there are midterm elections to posture for. At a minimum, the upside is likely limited through November contact expirations next week, which could easily carry into the first weeks of November, especially given that Crude Oil has not traded above 96.81-97.91 since the July 5th fallout. Let us also not forget price action did set a new low in the final trading days of September as the risk-landscape remains vulnerable. All we are saying is that if you followed us long, it is certainly time to monetize things if you have not already. Furthermore, there is potential to capitalize on near-term downside within a defined-risk strategy.

Eroding the rally and coupling with the global recession fears are rising virus cases in China. Additionally, Russian Foreign Minister Lavrov said this morning if the U.S. proposes a Putin-Biden meeting, they will consider it.

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Gold (December) / Silver (December)

Gold, yesterday’s close:  Settled at 1675.2, down 34.1

Silver, yesterday’s close: Settled at 19.615, down 0.64

Fundamentals:  Precious metals bulls simply cannot have good things. One week ago, we were high-fiving with a potential breakout rally on our hands, now we are defending a floor to cling to a constructive month. We mean this facetiously, of course, there was much less high-fiving one week ago and much more profit-taking. The reality is Gold and Silver have been in an intermediate downtrend since March, and our long-standing rhetoric is more important than ever, ‘you want to be capitalizing on Gold and Silver when everyone is screaming for it’. These days, not many are screaming for it, but the Managed-Money Net-Short position, as of last Tuesday, in Silver turned positive for the first time since the end of June, and Gold’s was reduced by 84% from -43,094. While the ever-moving Fed goalposts can certainly be to blame for Gold and Silver’s tough times, per our discussion in the S&P/NQ section, the Chinese Yuan’s one-way ticket south is been a drastic headwind. Today, the USDCNH hit a nearly two-week high, and a potential reemergence of virus cases in China would not bode well for the local currency.

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Silver (December)

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