Equities Rebound as Rates Remain Elevated, Commodities Mixed | Morning Express
E-mini S&P (March) / NQ (March)
S&P, last week’s close: Settled at 3839, up 73.50 on Friday and 29.75 on the week
NQ, last week’s close: Settled at 12,663.75, up 208.75 on Friday and down 247.25 on the week
Fundamentals: A sharp reversal from deep in the negative Friday carried into last night’s open, but the exuberance quickly dissipated. Tech is leading the way lower once again as rates resume their rise on the heels of the Senate passing President Biden’s lauded $1.9 trillion spending package. Last week was a melting pot of narratives. Disappointing Manufacturing PMI data out of China early in the week was quickly forgotten by the headlines, but clearly not by markets. Johnson & Johnson’s one-shot vaccine was approved by the FDA and a partnership with Merck will ramp production. State and local governments announced an easing of restrictions, bringing further tailwinds to the reopening trade. The rise in Treasury yields had paused since capitulatory-like conditions on February 25th but were reinvigorated by comments from Fed Chair Powell Wednesday; the committee is not looking to implement yield curve control. This led to a surge in the longer-end of the curve and liquidation across equity markets ensued. OPEC+ decided to extend production restrictions, further tightening the Oil market. On Friday, a much stronger than expected jobs report was headlined by massive growth in the services sector as businesses plan to reopen and the Unemployment Rate dropped to a pandemic low of 6.2%.
The $1.9 trillion fiscal stimulus package returns to the House today after the Senate passed it with small edits over the weekend. Most notably, $15/hour minimum wage was dropped. The House may vote as early as tomorrow and if everything stays on track, the bill will be signed by President Biden before the weekend. Benefits from December’s bill expire on March 14th. The massive spending and this week’s auctions (supply) are clearly being priced into the Treasury market; the 10-year hit a high yield of 1.622 on Friday and is hovering at that level this morning.
The ECB grabs the spotlight Thursday with the conclusion of a policy meeting. U.S. CPI data is front and center Wednesday, and the Federal Reserve has entered a quiet period ahead of next week’s policy meeting.
Technicals: In recent weeks, we have laid out lofty expectations for this market, including a rolling 12-month target of 4600 in the S&P. We maintain that such is very doable if the market can continue to work through this period of weakness as the healthy consolidation that it is. On Friday, the S&P surged from a higher low than Thursday to close above a critical level of major three-star resistance at 3811-3816.75. Furthermore, it extended gains to a high of 3866.25 Sunday night and was met by major three-star resistance at 3867-3868. We now have first key support at 3827-3833 and continued action above here is very constructive while continued action above major three-star support at 3811-3816.75 is nearly necessary. Friday’s settlement of 3839 aligns with 3842.25 as our Pivot; while above here the bulls are clearly in the driver’s seat on the session. It is hard to consider the bulls as such if one is stuck in the forest and cannot see the trees; this is still a very strong bull market and one that is only about 3% from its record high. The stage is set for a recovery, but we must see two things. First, we must see a close above 3899-3903 and second, we must not see a close below major three-star support again at 3781-3785, furthermore, preferably not 3797.25 as the overnight low pinged a crucial level of support.
The NQ has a tougher path to recovery, but one that we also believe in. Friday’s vicious rebound settled right at a crucial level of major three-star resistance at 12,616-12,662 and this will continue to be resistance until we close decisively above it despite such price action early in the overnight. That overnight high of 12,761 failed at key resistance at 12,767-12,797 and this will continue to be a hurdle. The NQ needs continued action above ... Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and technical outlook, actionable bias, and proprietary levels for the markets you trade emailed each morning.
Crude Oil (April)
Last week’s close: Settled at 66.09, up 2.26 on Friday and 4.59 on the week
Fundamentals: Crude Oil surged on the open Sunday night after Houthi rebels in Yemen attached Oil facilities in Saudi Arabia over the weekend. The market finished last week at the highest weekly close since October 2018 after OPEC+ decided to delay any significant production increases in April. The attacks were an added tailwind to the tape, hitting a high of 67.98. Price action has retreated into this morning after Saudi Aramco said overnight that its operations were not affected. Regardless, this coupled with the U.S. military attacks on Iran-backed militias in Syria in retaliation to attacks on U.S. forces in Iraq, is an ever-present reminder of what an Oil market is like with mounting frictions in the Middle East. Those frictions dissipated after last year’s U.S.-Iran battles in the first weeks of January due to the onset of the pandemic. Crude Oil eerily bled higher into the weekend as traders added geopolitical premiums.
Technicals: This is a breakout in Crude Oil. After closing right at the trend line from its 2008 record high of $147 the prior week, last week was a decisive about the mark at $64. We will now look to the January 2020 peak of 65.65 as a point of balance and continued action above here will drive prices higher towards $70. Still, there is resistance at the April 2019 peak of 66.60 and this aligns with our momentum indicator now at 66.45 to create strong overhead resistance on the session. In front of that is Friday’s settlement of 66.09. Crude certainly has its work cut out for it, but will remain constructive above ... Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and technical outlook, actionable bias, and proprietary levels for the markets you trade emailed each morning.
Gold (April) / Silver (March)
Gold, last week’s close: Settled at 1698.5, down 2.2 on Friday and 30.3 on the week
Silver, last week’s close: Settled at 28.285, down 0.175 on Friday and 1.115 on the week
Fundamentals: Geopolitical tensions in the Middle East breathed life into Gold and Silver early Sunday night, but it was short-lived as Gold trekked to a new swing low early this morning. The U.S. Treasury complex was less concerned with geopolitics last night, instead, it moved lower focusing on the $1.9 trillion spending bill passed by the Senate over the weekend. Now, we do believe that Treasuries are getting a little overdone to the downside, at least in the near-term, and the 10-year is stabilizing from a new low overnight as it prices in the added supply from spending and the impending auctions this week. The rise in the Dollar has also hurt Gold. Bill Baruch joined CNBC’s Halftime Report on Friday to discuss the Dollar Index trade. The ECB is on deck with a policy decision Thursday morning. Early last week, comments from President Lagarde pointed to being comfortable with the rise in yields. If they take a more aggressive approach to suppress the uptick while the Euro maintains a stable price, it will prove to be supportive to Gold. Also, U.S. CPI data is due on Wednesday.
Technicals: Both Gold and Silver are testing levels of crucial support but have yet to truly respond and clear overhead resistance to begin repair. For Gold this is major three-star support at 1671-1680 and for Silver this is major three-star support at 24.77-25.00. Last night, Gold retested previous support, now major three-star resistance at 1710 and similarly, Silver tested 25.97-26.15; they need to clear these levels in order to begin repairing just the damage from late last week. Our momentum indicators come in at ... Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and technical outlook, actionable bias, and proprietary levels for the markets you trade emailed each morning.
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