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

 

S&P, yesterday’s close: Settled at 4107.50, down 29.25

NQ, yesterday’s close: Settled at 13,100.75, down 83.75

Fundamentals: The Federal Reserve hiked rates by 25bps yesterday, and merely an hour after Fed Chair Powell finished taking questions, PacWest was the next shoe to drop in the banking sector. The company’s stock was down more than 50% last night after announcing it is exploring options, including a sale. Did the Chair have no clue? I am losing confidence as the Fed shows little control. For starters, how does San Francisco President Daly still have a job? There is incompetence throughout the Fed, and it is muddying what’s left of Powell’s legacy. It is one thing to ignore inflation for lagging jobs data in 2021 or flip flop from a dovish victory lap in February to a hawk in March, despite the data trending opposite, people make mistakes, and markets are emotional, but to see the consistent lack of supervision, whether it be outside initiatives (distractions) that have absolutely nothing to do with banking or personal trading activity, it simply becomes poor management. Maybe Powell doesn’t make those calls, I don’t know, but it’s his reputation on the line. 

 

Do not miss yesterday’s Midday Market Minute, post-FOMC.

 

Technicals: Price action quickly rebounded after flushing through the electronic close and reopen last night but remains on soft footing. Underpinning the snap back was a floor of support defined by last week’s gap settlements, heavy volume in the first quarter, and other technical indicators at 4066-4076 in the E-mini S&P. Similarly, the E-mini NQ has multiple waves of strong support defined within a similar narrative and detailed below. However, like major three-star resistance at 4155 in the E-mini S&P early yesterday, strong overhead resistance has again kept rally attempts in check. If an intraday washout is in order and the floor of support broken, it opens the door for the E-mini S&P to test rare major four-star support at ...

 

Now, let’s remove ourselves from the banking disaster. Although there is a systematic failure of a critical piece of the banking structure, the larger institutions within it are, so far, not under any pressure. To put some of the regional bank issues in perspective, these companies are $1 to $10 billion in market cap, for the most part. Apple reports earnings after the bell today and a 5% move up or down will be worth $133 billion. For a more niche company like Adobe or Deere, a 5% move up or down is about $5 billion, equal to the size of most regional banks before the crisis. We say this because we do not want to take our eyes off the ball here and get caught up in headlines. It is important to stay nimble, day to day, and there will certainly be another 3-5% move down over a 24-hour trading period again this year, maybe multiple ones. However, the odds of another 25bps hike in June have completely disappeared, and we are now seeing the odds of a 25bps cut emerge. Bring out your 2019 playbook. Need I say more?

 

The ECB hiked rates by 25bps as expected at its policy decision this morning, and we now await ECB President Lagarde’s press conference at 7:45 am CT. Initial Weekly Jobless Claims came in higher than expected at 242kk versus 240k, which shows loosening conditions however, Nonfarm Productivity fell in Q1 by -2.7% versus -1.8%, and Unit Labor Costs rose by 6.3% versus 5.5%, helping to buoy the U.S. Dollar and rates.

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Crude Oil (June)

Yesterday’s close: Settled at 68.60, down 3.06

 

Fundamentals: The bloodbath in Crude Oil continued into today’s session, falling as much as 6.6% on the reopen, where there was basically no buyers. Was this the needed capitulation? Maybe, and we will discuss more in the Technical section below. Yesterday’s weekly EIA report did not give the bulls any ammo. As Bill Baruch noted in the Midday Market Minute, Gasoline inventories grew by 1.734 mb versus -1.157 expected, despite Gasoline Production -0.638 mb and Refinery Utilization -0.6% w/w versus +0.3% expected. In other words, Gasoline demand continues to weaken. At this level, we invite the negativity, U.S. Gasoline demand coupled with global Oil demand growth fears. From a positioning standpoint, this has encouraged the selling, opening the door to an under-positioned market environment, just as Gasoline becomes seasonally bullish on May 8th. Also, by the way, we continue to believe a China growth impulse will hit later this summer, and as negativity mounts, less of a growth impulse is needed to have a bullish impact.

 

Technicals: Price action is attempting to stabilize after last night’s fallout. Capitulation is defined by volume, and although there has been tremendous volume this week, not a lot changed hands early last night during the massive 6.6% drop. In fact, only 14,390 contracts traded within the first 30 minutes last night, versus 16,000 -32,000 trading every 30 minutes from 8:00 am to 10:00 am CT yesterday morning. However, we will look to the weekly volume numbers to be most important, coupled with the weekly close. The bottom during the week of March 13th had the most volume since the onset of the Russia-Ukraine war. With two sessions left it will be crucial to see if volume increases significantly and price action can leave a tail, settling above major three-star resistance at ...

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Gold (June) / Silver (July)

 

Gold, yesterday’s close: Settled at 2037.0, up 13.7

Silver, yesterday’s close: Settled at 25.681, up 0.062

 

Fundamentals: Gold ripped to a high of 2085.4 on the open last night, as the PacWest news dropped, taking out 2078.8 high at the onset of the Ukraine-Russia war, but just shy of the pandemic high of 2089.2. From there, price action chopped around before retreating as some immediate fears subsided, and the E-mini S&P rebounded from session lows into this morning. Additionally, the U.S. Dollar is staging a rebound through the ECB news and this morning’s slate of economic data. This builds into tomorrow’s Nonfarm Payrolls report.

 

Technicals: With tomorrow’s Nonfarm Payrolls report in mind, we do not want to see a massive tail and a second failed high at 2089, or arguably a third given 2063 traded three weeks ago. As prices retreat our Pivot and point of balance, previous resistance aligned with our momentum indicator and detailed below will be critical; we must see this level hold and a weekly close above here. Similarly, we want Silver to close the week out above previous resistance, now aligning with our momentum indicator at ...

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Silver (July)

 

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