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- Do not miss our Top Things to Watch this Week, out every Sunday. - Stocks were overdue for a bounce. That began in the final minutes Thursday and played out through much of Friday. - A slate of April economic data out of China last night quickly eroded the positive tailwinds; Industrial Production contracted YoY at -2.9% vs +0.4% exp, Retail Sales whiffed -11.1% vs -6.1%, and Fixed Asset Investment was a touch below at +6.8% vs +7.0%. - S&P started softening from session highs at 8:00 pm CT Sunday night; sellers were preparing for a weak slate of Chinese data to arrive at 9:00 am CT. - What is to be expected when you lockdown the largest city and 25 million people (Shanghai), impose strict curbs with mass testing on the second largest city (Beijing) and more than 21 million people, and impose some curbs on the third-largest city (Guangzhou)? - We acknowledge that economic data across the globe, from China to U.S., and recession fears are rising. - Former Goldman Sachs CEO, Lloyd Blankfein, made headlines over the weekend, saying the risk of a recession is “very, very high”. - Also, the Federal Reserve has telegraphed it will suppress demand to slow the economy and cannot guarantee a soft landing. In other words, battling inflation is more important than avoiding a recession. - With that said, we are approaching the realm of known knowns and excessive negativity which opens the door to positive surprises and less selling on negative news; risk is to the upside. - We do not believe “risk is to the upside” as an ongoing phenomenon, but a window between now and July. - The Federal Reserve has been very transparent about its plans at the June 15th meeting, and a 50-basis point hike is priced with an 82.9% probability (17.1% chance of 75-bps). - CPI for April was hot last week, but April was never supposed to be an inflection point for inflation; it is June through August that will be delivered in July through September. - Catch up on last week’s conversation; how a VIX spike is not needed to create a bottom in stocks. https://www.bluelinefutures.com/insights/post/381/ https://www.bluelinefutures.com/insights/post/384/ https://www.bluelinefutures.com/research/post/833/ - NY Empire State Manufacturing whiffed at -11.60 versus +17.00 expected. - NY Fed President Williams speaks at 8:20 am CT.

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

S&P, yesterday’s close: Settled at 4019.75, up 92.00 on Friday and down 99.75 on the week

NQ, yesterday’s close: Settled at 12,382.75, up 435.50 on Friday and down 313.00 on the week

- Last week, the S&P came within 10 points of 3846, a 20% correction from highs, and the top end of our rare major four-star support.

- Last week, the NQ perfectly held the 50% retracement back to pandemic low.

- Sign of near-term momentum switching hands; late selling Thursday was staved off for a rally in final minutes and midday selling Friday was defended for a second half rebound.

- Selling on the heels of China’s data held Friday’s midday low, which held above Friday’s opening bell range. This is the constructive action we need to see.

- QQQ/XLP continued a relative strength thrust, must maintain to confirm follow through.

- We will remain more Bullish as long as price action can hold out above major three-star support at 3970.50-3975.75 in the S&P and 12,207-12,218 in the NQ.

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NQ (June)

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Crude Oil (June)

Yesterday’s close:  Settled at 110.49, up 4.36 on Friday and 0.72 on the week

- China’s economic data weighed on Crude and specifically that refinery throughput fell to a two-year low of 12.61 mbpd.

- As we noted above, China’s data was expected to be poor and they are ok with that, playing the long game.

- Saudi Aramco, now the world’s largest company after dethroning Apple last week, reported record profits.

- Iraq is said to reach production targets in May and June.

- Prices came in overnight on heels of China and Iraq, but lifting due to Germany saying early today the EU will move forward on Russian Oil embargo despite not having unanimous support.

- The bulls are in the driver’s seat while out above 109.60-109.77.

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Gold (June) / Silver (July)

Gold, yesterday’s close: Settled at 1808.2, down 16.4 on Friday and 74.6 on the week

Silver, yesterday’s close: Settled at 21.001, up 0.228 on Friday and down 1.366 on the week

- Metals plunged on the heels of China’s data but have stabilized into this morning as bad news getting priced in and already expected.

- U.S. Dollar Index has fallen off session highs and Treasuries remain buoyant, helping underpin narrative for oversold bounce.

- Gold held old gap support at 1786.6-1789.3 from late January.

- Silver held a higher low than last week.

- Price action in Gold must trade out above our momentum indicator and resistance at 1807-1810 to pave way for near-term bounce.

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Silver (July)

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