Panic, Although Uncomfortable, Is Welcomed | Morning Express | 4/27/22
Posted: April 27, 2022, 9:25 a.m.
E-mini S&P (June) / NQ (June)
S&P, yesterday’s close: Settled at 4170.50, down 122.50
NQ, yesterday’s close: Settled at 13016.00, down 519.75
Yesterday’s bloodbath, although uncomfortable, was welcomed. The S&P fell 7% from Thursday’s high to Monday’s low and there were some signs of panic before rebounding into Monday’s close. It was yesterday’s failed rally and bludgeoning in which real panic took place. Amid indiscriminate selling, the S&P lost 2% and the NQ 3.1% in just the final hour, before finishing the electronic session on the low. Capitulatory environments are born from panic. Panic selling into a low, or a short squeeze and panic buying from the fear of missing out at a high. We strongly believe in supply-demand technicals; if everyone has already bought, who is left to buy, and if everyone has already sold, who is left to sell. To reiterate our voice here yesterday, it is a fool’s errand to call a bottom. Judging several factors, including the measured downside and panic (excessive negativity), it is a fair assessment to believe a bottoming process is underway. A beginning to an end of the selling, if you will.
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Earnings from tech giants Microsoft and Alphabet were released at yesterday’s close and the uncertainties provided played a role in such late indiscriminate selling. Microsoft beat both top and bottom-line expectations, but the stock initially lost as much as 3% before rebounding to gain as much as 6% afterhours. It has settled in and pointing to a positive open of 3.5%. The company’s cloud business crushed expectations and there was double-digit growth across many products. It was Alphabet’s miss of both top and bottom-line estimates that weighed on the tape. The company’s advertising revenues took a hit, in part due to TikTok. The stock is down more than 4% ahead of the opening bell and its narrative is weighing on Facebook, which is down 3.5% and reports after the bell. Boeing is not helping sentiment this morning, losing 2.75 per share when a loss of 0.19 was expected. Its revenues also fell short.
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NQ (June)
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Crude Oil (June)
Yesterday’s close: Settled at 101.70, up 3.16
Fundamentals: Crude Oil is slipping this morning on comments from the German Vice-Chancellor Habeck. He said, “Germany needs to do more work to get through the coming winter without Russian Gas”. He added a halt would shrink the German economy by 5% and trigger a recession, ending Gas imports next year is not realistic. Crude Oil rallied 8% from Monday’s low in part due to Russia halting Gas supplies to Poland and Bulgaria due to not paying in Rubles. However, Goldman Sachs watered-down this narrative by saying the impact would be limited. Traders also want to keep an ear to the ground for China coming out of lockdowns as it will be seen as a bullish catalyst.
We look to weekly inventory data from the EIA at 9:30 am CT. Expectations are for +2.0 mb of Crude, +0.808 mb Gasoline, and -0.292 mb Distillates. Last night, the private API survey saw a much larger build of 4.784 m Crude and +1.143 mb of Gasoline. This does set a lower bar for today’s EIA data to be bullish. Remember, we must look at the report as a whole and the impact of WoW Net Imports.
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Gold (June) / Silver (July)
Gold, yesterday’s close: Settled at 1904.1, up 8.1
Silver, yesterday’s close: Settled at 23.59, down 0.14
Fundamentals: Continued strength in the U.S. Dollar is weighing on Gold and Silver. The U.S. Dollar Index has added another 0.5% this morning and is trading at the highest level since the onset of the pandemic in March 2020. It also strengthened against the Chinese Yuan late yesterday and the pair remains elevated at its recent high, the highest since November 2020. Both previous and base metals are most sensitive to this currency pair and are likely to remain under some pressures until there is a reprieve. Today’s economic calendar is light as the Federal Reserve is in blackout ahead of next week’s FOMC meeting.
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Silver (July)
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