An Infection Point Within a New Bull Market?

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

S&P, yesterday’s close: Settled at 3975.50, down 12.50

NQ, yesterday’s close: Settled at 12,072.25, down 11.00

Fundamentals: E-mini S&P and E-mini NQ futures stalled out in the final two hours yesterday to finish at new session lows. The move coincided with U.S. Dollar strength and a likely air-pocket into month-end. Price action remained weak into the overnight, with each index trading down to its Friday afternoon range before Chinese PMIs topped expectations and reinvigorated sentiment. At the onset of the first opening bell of March, the U.S. Dollar Index slipped to its lowest level in a week after German CPI came in hotter than expected. The news, though weighing on the Dollar due to Euro strength, has done the same to equities while lifting yields. The hotter-than-expected inflation from Germany should not come as a surprise due to yesterday’s slate from France and Spain. However, ECB Governing Council member Nagel, also the President of the German Bundesbank, immediately spoke of significant ECB rate hikes after March and a faster QT, saying, “ECB policy must be more stubborn than inflation.” U.S. equity benchmarks are now on their backfoot ahead of the bell as we eye a slate of manufacturing data from the U.S. Up first is the final February SPGI Manufacturing PMI at 8:45 am CT. It is followed by the more closely watched ISM Manufacturing at 9:00 am CT.

Do not miss our daily Midday Market Minute, from yesterday. 

In yesterday’s Morning Express, we spoke of good news beginning to have a good impact on equities. CME Fed Fund futures have now priced-out any probabilities of a rate cut in 2023 with a terminal rate of 5.25-5.50%, matching the Federal Reserve’s expectations. Does bad news still have an uplifting impact? We will see with today’s Manufacturing PMIs. What we do know is that components like Prices Paid and New Orders will continue to have more weight within the report than ever before.

Lastly, Treasury yields are at a critical inflection point. With data signaling inflation in both the U.S. and Europe is again running hot, yields have remained very elevated. However, the U.S. 10-year Note has not been able to pierce 4.0%, and 10-year futures prices are testing a critical level of support going back to the November 10^th rally. Additionally, the U.S. 2-year yield has been the leader higher, but it too is showing signs of exhaustion at its spike from Friday, struggling to hold above 4.84% as it tests the November 4^th high of 4.88%. If yields retreat and futures prices firm up, it will be seen as a supportive catalyst to equity markets. However, if yields surge through these critical areas, it could be the straw that breaks the camel’s back.

Technicals: Upon yesterday’s late session selling, price action in the E-mini S&P and E-mini NQ gravitated to major three-star support at 3972.25-3975.75 and rare major four-star support at 11,990-12,055. The NQ has held up much better and responded to the bottom end of that critical pocket. However, the S&P violated it and traded down to its own rare major four-star pocket at 3938.50-3954, before responding overnight. Although their respective rallies into this morning have again stalled at resistance, highlighted below, the two key takeaways into today’s session are … Click here to get our (FULL) daily reports emailed to you!

Crude Oil (April)

Yesterday’s close: Settled at 77.05, up 1.37

Fundamentals: Crude Oil retreated from a session high of 77.83 yesterday to close out the month and incurred additional selling after the API inventory print. Strong PMIs and upbeat economic comments out of China last night quickly reinvigorated the tape, but to a lower high before selling kicked in after Russia said it has no plans of selling its Oil cheaply.

It is important to note that yesterday’s high of 77.83 was achieved at the U.S. intraday open at 8:00 am CT. After struggling to extend gains, it retreated with broader risk-assets before the private API survey showed another large build of 6.203 mb. Although some of this was offset by -1.774 mb Gasoline and -0.3441 mb Distillates, another large headline build of Crude will begin weighing more on sentiment. API also saw inventories at Cushing increase by 483,000 barrels.

The official EIA data is front and center at 9:30 am CT. Analysts expect +0.457 mb Crude, +0.464 mb Gasoline, and -0.462 mb Distillates. Refinery Utilization and Exports will play a role in understanding the breadth of the report.

Technicals: Price action has been choppy but decisively cleared our momentum indicator in the early hours of yesterday morning. However, this level, highlighted as our Pivot and point of balance below, has now been surrendered. While trading below here, it signals near-term exhaustion. Although price action is responding to first key support, continued action below our momentum indicator opens the door for a test into major three-star support below at … Click here to get our (FULL) daily reports emailed to you!

Gold (April) / Silver (May)

Gold, yesterday’s close: Settled at 1836.7, up 11.8

Silver, yesterday’s close: Settled at 21.071, up 0.278

Fundamentals: Yesterday was a significant turn for Gold and Silver, but today’s slate of Manufacturing PMIs remains to define it as a month-end bounce or something more significant. Final SPGI Manufacturing PMI is due at 8:45 am CT, and the more closely watched ISM Manufacturing PMIs follow at 9:00 am CT. Bringing a tailwind this morning is U.S. Dollar weakness, however, it comes at the expense of higher yields due to hotter-than-expected German CPI and hawkish comments from the ECB’s Nagel, a crosswind. We turned cautiously Bullish early yesterday morning and will look to a steady close today to define a more Bullish near-to intermediate-term outlook while defining a level to be such above.

Technicals: On Monday evening, I was speaking with a client. He asked when he should buy Gold. My response was the day we make a new low and close $30 off that low, like July, September, and November. Little did I know, such a day was about to hit yesterday. Gold traded to an early low of 1810.8 before settling at 1836.7 and clearly out above the prior day’s high. Silver gave us similar price action. We now must see continued construction out above previous key resistance in Gold at 1824.8-1827.7 at a minimum. Ultimately, the next previous resistance pocket is what we must see price action hold above in order to continue feeding the rally to our next upside target, this is now our Pivot and point of balance at … Click here to get our (FULL) daily reports emailed to you!

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Originally Posted February 28, 2023 – An Infection Point Within a New Bull Market?