Inflation Muscles Policy | Morning Express 11.2.2021

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

S&P, yesterday’s close: Settled at 4605.75, up 8.75

NQ, yesterday’s close: Settled at 15,894.25, up 55.75

Fundamentals: U.S. benchmarks were little changed overnight following a deluge of strong earnings and ahead of this morning’s slate. The S&P has so far been contained after achieving our rolling target of 4620. In yesterday’s Midday Market Minute, Bill Baruch touched on its significance. Among a slew of companies reporting this morning, Pfizer, Estee Lauder, ConocoPhillips, IDEXX Labs, Marathon Petroleum, and Dupont all beat top-and bottom-line estimates. T-Mobile, Amgen, and Mondelez are due after the bell.

The Federal Reserve begins their two-day policy meeting today and is expected to announce a plan to start tapering bond purchases tomorrow. The Reserve Bank of Australia met last night and dropped their yield targeting plan. Inflation and a reopening economy proved to be uncontrollable after the yield on the country’s 3-year debt rose nearly one whole percentage point in October. The undertone of uncontrollable inflation is beginning to take hold. The transitory camp can point to Core CPI and PCE all they want, but prices are rising whether it from supply chain disruptions, outsized demand, or money printing. Will the Federal Reserve acknowledge inflation to be higher and stickier than expected? In doing so, they risk further flattening the yield curve. Since July, the yield on the U.S. 5-year has risen nearly half of one percent, whereas the yield on the 30-year is flat, for all intents and purposes. Ultimately, rate futures would theoretically speed up the timeline to hike. They already show nearly a 60% probability the Fed hikes by June. We will continue this conversation into tomorrow, but what this means is the

Federal Reserve will certainly have a balancing act to perform. The economic calendar is light before payrolls also hit the picture tomorrow. Earlier this morning, final Eurozone Manufacturing PMI for October was revised lower. Washington is in focus as House Speaker Pelosi said she will move forward with a vote on President Biden’s $1.75 trillion spending bill this week as well as the $550 billion infrastructure plan already passed in the Senate. COP26, the United Nations Climate Conference, is underway and grabbing headlines as the world’s elite jet set to discuss climate initiatives.

Technicals: Despite a soft tape after achieving 4620, price action remains firm, underpinned by strong earnings. Yesterday’s volatility created a range that price action now must violate and close outside of; this is obviously defined overhead in the S&P by 4618.50-4620 and in the NQ by 15,899-15,914. To the downside, we look to first key support in the S&P at 4579.75-4983 and major three-star support in the NQ at 15,764-15,780, two levels that were pinged yesterday. The market is trying to find direction as it consolidates; use decisive action above or below our momentum indicator and Pivots 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. Crude Oil (December) Yesterday’s close: Settled at 84.05, up 0.48

Fundamentals: Major three-star resistance, previously rare major four-star, continues to hold and is keeping a lid on price action. Crude Oil is peeling back after another direct test into the level aligning with the psychological $85 mark. Inventory data will dominate the focus over the next 24 hours but make no mistake comments leading into Thursday’s OPEC+ meeting and from energy companies reporting earnings will leave their stamp, along with macro developments tied to central bank policy. Oil demand rising to the pre-pandemic benchmark of 100 mpbd will become a growing theme. This paves the way for demand in excess next year as restrictions are lifted and travel picks up. Will there be enough Oil? Early estimates for this week’s inventory data are +1.6 mb Crude, -1.2 mb Gasoline, and -1.53 mb Distillates.

Technicals: Yesterday’s rally peaked at 84.88 early and was contained by strong resistance at 84.60-85.00. It then slipped through this morning to nearly ping what is first key support at 82.50-82.74. If price action can hold above here, it would help build for higher prices. Although we still see little value in the very near-term at these elevated levels, it will be very supportive if the bulls win a battle with our Pivot and point of balance 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. Gold (December) / Silver (December) Gold, yesterday’s close: Settled at 1795.8, up 11.9 Silver, yesterday’s close: Settled at 24.073, up 0.124

Fundamentals: Gold and Silver keyed off U.S. Dollar weakness and a firm Treasury complex yesterday to rebound from Friday’s early losses. This came despite a better than expected read on U.S. ISM Manufacturing. Despite a strong showing from Platinum and Palladium yesterday on inflation tailwinds, Gold and Silver remain very rangebound ahead of tomorrow’s Federal Reserve policy decision. However, given the recent technical failure at such crucial levels of resistance, we do believe the bears have an edge. Today’s economic calendar is overall light before payrolls and the Fed tomorrow; Gold and Silver will lean on macro developments across other asset classes.

Technicals: Price action has moved off session highs with Silver down nearly 1% at the onset of U.S. hours. On Friday and again yesterday, Silver found footing at a trend line from the late September low at 23.70 and 23.80, respectively. However, today’s wave lower has begun to violate this line. Gold’s muted range may just allude to this being noise in Silver. Look to continued action below our Pivots as keeping the tape heavy, but ultimately, we must see Gold close below ... 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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