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

S&P, last week’s close: Settled at 4188.50, up 34.75 on Friday and 31.75 on the week

NQ, last week’s close: Settled at 13,320.25, up 89.00 on Friday and 229.75 on the week

Fundamentals: I want nothing more than to title today’s Morning Express, ‘Buy in May, This Bull Market Is Here to Stay,’ but it isn’t that easy. Everyone reading this is thinking, “Bill, how can you not be even more bullish after last week’s earnings, rejection of lower prices, and the surge through Friday’s close?” Believe me, it is hard, this bull market has defied all pessimists and non-believers, but we must account for the risk factors ahead. No, not just one event, at least eight, but who is counting? ISM Manufacturing is due today at 9:00 am CT, Eurozone CPI tomorrow at 4:00 am CT, followed by JOLTs at 9:00. We then get ISM Non-Manufacturing and a Fed policy decision Wednesday before an ECB decision Thursday, and Nonfarm Payrolls Friday. Oh, and Apple’s earnings are Thursday after the bell, preceded by a slew of reports.

 

Wednesday’s Fed decision is a mere foregone conclusion. The CME’s FedWatch Tool is signaling an 87.5% probability they hike by 25bps. This increases the emphasis on this week’s data and the Fed’s statement as the focus quickly shifts to the June meeting. We are watching the June odds most closely, where the FedWatch Tool signals a 27% probability the Fed hikes another 25bps, skewing a risk this rises. We keep coming back to the Michigan Consumer survey, which on Friday confirmed 1-year Inflation Expectations rising to 4.6% in April, from 3.6% in March, a shocking surge when 3.5% was expected mid-month. The Fed could lean on this narrative, having called inflation expectations a self-fulfilling prophecy. Furthermore, some believe the First Republic takeover was the last shoe to drop in banking, and with equity indices basically at eight-month highs, it gives the data-dependent Federal Reserve room to hold a more hawkish narrative. Remember, we are a firm believer the bank cannot give any indication of plans to pivot until the exact moment they are ready, and for this reason, we could see those June hike odds make a stand over the next month and a half, underpinning strength in the U.S. Dollar and higher rates. More specifically, although we remain Bullish in Bias and extremely constructive on the E-mini S&P and E-mini NQ, we always try to poke holes in our themes, and a rise in June odds would act as a headwind.

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Crude Oil (June)

Last week’s close: Settled at 76.78, up 2.02 on Friday and down 1.09 on the week

Fundamentals: Crude Oil surrendered all of Friday’s gains as of the intraday open at 8:00 am CT but is attempting to stabilize off that level of support. PMI data from China Saturday night underwhelmed, with Manufacturing showing a surprise contraction at 49.2 versus 51.4 expected. There are certainly global growth concerns, and we are reminded that as the OPEC+ supply cuts take effect today; they cut production for a reason. The focus this week will also be Federal Reserve policy and as we asked in the S&P/NQ section, will the committee find reason to take a more hawkish tone into the June meeting?

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Gold (June) / Silver (July)

Gold, last week’s close: Settled at 1999.1, up 0.1 on Friday and 8.6 on the week

Silver, last week’s close: Settled at 25.226, up 0.017 on Friday and down 0.054 on the week

 

Fundamentals: Gold and Silver had a banging start to the month before April ISM Manufacturing data was released. Despite final SPGI Manufacturing for April at 50.2, the ISM’s 47.1 beat the expected 46.8. Additionally, Manufacturing Prices and Employment were both expected to contract at 49.0 and 47.9, but came in much stronger at 53.2 and 50.2, respectively. This flipped the early script of the session, turning gainers in Gold and Platinum into losers and cutting Silver’s session by two thirds. Tying ISM into our discussion in the S&P/NQ section, this is better economic data and supports the idea of another 25bps hike in June. In fact, after that release the CME’s Fed Watch Tool has increased the odds of a May hike from 87.5% to 94.2% and another hike in June from 27% to 33.2%. Much of the world is on Labor Day holiday today, so volume is expected to be thin, but this event-driven price action is here to stay this week.

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Silver (July)

 

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