E-mini S&P (December) / NQ (December)
S&P, yesterday’s close: Settled at 3958.00, down 16.00
NQ, yesterday’s close: Settled at 11,588.00, down 120.00
Fundamentals: U.S. equity benchmarks have so far survived an uphill battle to start the week. China reported more than 27,000 cases on Monday and nearly 28,000 on Tuesday, the most since 28,973 set a record in April. Through today, there have been three deaths (all 87 years and older), the first since May. The surge in cases has led the government to implement a fresh wave of lockdowns, in sharp contrast to hopes the communist nation was easing its zero-virus policy and taking steps to reopen. Outbreaks in Beijing and the southern manufacturing hub of Guangzhou are most notable and could lead to a record number of lockdowns, disrupting both supply chains and the demand landscape.
Supportive tailwinds yesterday came from Cleveland Fed President Mester, a 2022 voter, and San Francisco Fed President Daly, a 2024 voter, who reiterated the Fed is likely to move to a slower pace of rate hikes. Their dialogue was refreshing for a market battling the virus news out of and coming on the heels of St. Louis Fed President Bullard’s comments on Friday, where he spoke of a terminal rate between 5-7%, with 5% becoming a new floor. Mester, who votes in December, notably said, “the market’s expectations of peak around 5% are not far off.” Today, Mester speaks again at 10:00 am CT, Kansas City Fed President George at 1:15 pm CT, and Bullard at 1:45 pm CT. All have a vote in December, before rotating out in 2023.
Richmond Manufacturing is due at 9:00 am CT. The U.S. Treasury will auction $35 billion in 7-year Notes. Tomorrow, the Fed will release the Minutes from their November meeting.
Technicals: All things considered, price action in both the S&P and NQ has remained extremely constructive. Buyers have defended rare major four-star support in the S&P and 3921.25-3925.25, and the layers surrounding it (noted in the levels below). Similarly, the NQ has held major three-star support at 11,513-11,569. Supports at these marks and the ones in proximity align many technical indicators and correlate with the November 10th post-CPI surge. Furthermore, both indices have so far handedly held out above the 21-day moving average, at 3887 and 11,416, signaling this is a constructive and mild pullback, allowing for price action to digest the recent run. Although the technical headwinds persist, and resistance levels are noted below, the slight lower lows and slight lower highs, on the heels of the November 10th surge are forming a sloppy bull-flag pattern. Remember, the pattern itself does not have to be perfect, it is about creating the market profile trapping sellers at lower levels in a bullishly constructive manner that leads to excess buying at higher prices. We will look to our momentum indicators that align to create our Pivot and point of balance, continued price action at and above these levels at … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (January)
Yesterday’s close: Settled at 80.04, down 0.07
Fundamentals: Crude Oil made a face-ripping rebound yesterday from the depths of massive support at $75. The virus surge in China and ensuing lockdowns (discussed in the S&P/NQ section) dragged the tape to a two-month low before the Saudi Energy Minister spoke. In a very apparent defense of price action, he denied a Wall Street Journal report OEPC+ is considering increasing production and said, “the current cut of 2 mbpd will be maintained until the end of 2023 and they are ready to intervene if additional measures are required to balance supply and demand.” His comments, furthered by the Kuwait and Iraq, lit a fire under the market driving it 6% into settlement, and higher into this morning. Ultimately, OPEC+ defined their floor, in contrast to the White House dumping SPR in order to suppress prices. During the week of November 7th, the administration dumped more than 4 mb from the SPR. Weekly U.S. inventories will begin hitting the picture today.
Technicals: Yesterday brought a lot to unpack both fundamentally and technically. Per the above, we noted how OPEC+ defined their floor. Technically, price action still has not settled below what was rare major four-star support at 77.75, now major three-star at 77.59-77.75, and yesterday’s volume was the most since the July 5th fallout (both only behind the Russian invasion of Ukraine in March this year). Given the tremendous volume, yesterday’s reversal has the makings of a capitulation. Although there is technical damage above to repair, defined in the resistance levels below, we now view the bulls back in the driver’s seat while holding out above major three-star support at … Click here to get our (FULL) daily reports emailed to you!
Gold (December) / Silver (December)
Gold, yesterday’s close: Settled at 1739.6, down 14.8
Silver, yesterday’s close: Settled at 20.872, down 0.125
Fundamentals: Gold and Silver struggled to start the week due to the U.S. Dollar’s ascent, bolstered by Chinese Yuan weakness. Ultimately, the surge in virus cases and ensuing lockdowns is an exportation of deflation from China. Although the Yuan has rebounded by nearly 0.50% today, it is still off its best local level by 1.7%. It is no coincidence that Gold has become exhausted in correlation, not only because it neared the $1800 mark. Things are on the mend so far today with the U.S. Dollar Index slipping slightly and the 10-year yield back below 3.80%. Traders should gear up for comments from Cleveland Fed President Mester at 10:00 am CT, Kansas City Fed President George at 1:15 pm CT, and the hawkish St. Louis Fed President Bullard at 1:45 pm CT. All have a vote in December, before rotating out in 2023. Richmond Manufacturing is due at 9:00 am CT. The U.S. Treasury will auction $35 billion in 7-year Notes. Tomorrow, the Fed will release the Minutes from their November meeting.
Technicals: Price action is on the mend but faces the tough task of strong overhead resistance. Recent weakness has so far been constructive and healthy, but a failure to regain major three-star resistance in Gold at 1755.8-1758.6 and Silver at 21.28-21.34 will leave the tape heavy. A battle at our Pivot and point of balance is underway, which aligns with our momentum indicators, at … Click here to get our (FULL) daily reports emailed to you!
—
Originally Posted November 22, 2022 – A Dynamic Tape, Crosswinds of Newsflow
Disclosure: Blue Line Futures
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results. The information contained within is not to be construed as a recommendation of any investment product or service.
Disclosure: Interactive Brokers
Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from Blue Line Futures and is being posted with its permission. The views expressed in this material are solely those of the author and/or Blue Line Futures and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Disclosure: Forex
There is a substantial risk of loss in foreign exchange trading. The settlement date of foreign exchange trades can vary due to time zone differences and bank holidays. When trading across foreign exchange markets, this may necessitate borrowing funds to settle foreign exchange trades. The interest rate on borrowed funds must be considered when computing the cost of trades across multiple markets.
Disclosure: Futures Trading
Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.
