E-mini S&P (March) / NQ (March)
S&P, yesterday’s close: Settled at 3765.50, down 51.25
NQ, yesterday’s close: Settled at 12,455, down 226.75
Fundamentals: Yesterday was a bloodbath. What started as a rebound session ahead of today’s pivotal Nonfarm Payroll report at 7:30 am CT, became a sea of red after Fed Chair Powell said the committee has not planned to implement yield curve control. Although Powell reiterated the Fed’s accommodative policy isn’t going anywhere and a marginal rise in inflation due to reopenings will only be transitory, it was his comments on the yield curve that cratered longer-dated bonds. The 2–10-year Note spread and the 5- 30-year Bond spread hit the highest since 2015 and 2014, respectively, as the yield curve continues to steepen sharply. We have extensively covered the rise in rates and its impact on stocks broadly as well as high-priced Tech specifically. In the past the Federal Reserve has used a maneuver known as Operation Twist to sell shorter-end notes and buy longer-duration bonds to artificially stop the steepening and encourage some flattening. Yesterday, he was asked about such implementation given the stark steepening of the curve and when he said the committee is not planning on such action, it was game over. The 10- and 30-year Treasury prices broke down to last Thursday’s levels, higher yields, and a vulnerable equity market followed suit.
Coming into yesterday, we had expected a consolidation ahead of today’s jobs data. This would have made sense not only on a fundamental basis given the importance of today’s read, but also on a technical basis. Economic activity has rebounded, but lagging job growth encourages more accommodative policy measures, both monetary and fiscal. Therefore, a ‘hot’ read today could have encouraged markets to perform in the manner they did yesterday. Whereas a Goldilocks read would be supportive. Our expectations are still within the same realm; a ‘hot’ read would send bonds lower, rates higher, and weigh on the risk-assets. However, a good chunk of the movement has already played out and this would create opportunity near yesterday’s lows. Expectations are for 182k jobs to have been added in February, the Unemployment Rate to remain steady at 6.3%, Wages to increase by 0.2% MoM, and +5.3% YoY.
Technicals: Price action is rebounding from yesterday’s bloodbath in a consolatory manner ahead of today’s Nonfarm Payroll. However, there is tremendous overhead damage that each index must now repair. First, the Pivots, are our momentum indicators. This morning, they are flattening out a bit after yesterday’s plunge and bring a point of balance. For the S&P, this is 3774 and for the NQ, this is 12,475. Above here, each can then attempt to begin repairing damage. Given this week’s chop, we have multiple levels of major three-star resistance for the S&P overhead. The first aligns with previous lows and a critical level at 3785. The next is most crucial 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 (April)
Yesterday’s close: Settled at 63.83, up 2.55
Fundamentals: Crude Oil surged yesterday on the heels of OPEC+ and overnight hit a high of 65.57. This is the highest level since the Iran attacks in the first week of last year. Yesterday, OPEC+ decided to keep production unchanged through April. This was a surprising outcome as we and many others expected Saudi Arabia to bring back in April the 1 mbpd it unilaterally cut through February and March. The cartel continued to grant Russia a small exemption and overall, there is a small increase of 150,000 bpd in April compared to a 1.3-1.5 mbpd increase expected. This sent Crude Oil surging when other risk assets were under immense pressure due to the rise in longer dated bond yields. OPEC+ plans to meet again April 1st. Baker Hughes Rig Count data is due at noon CT.
Technicals: Yesterday’s move through a high of 64.00 decisively breaks a trend line dating back to the $147 high in July 2008. A close above 64.00 today, for the weekly close, signals a breakout of nearly a 13-year downtrend. To certify a conclusive break, it still must occur on a monthly basis, but the ball is clearly rolling in the right direction. Continued action above 63.81-64.00 is very bullish. However, there are two previous peaks 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 (April) / Silver (May)
Gold, yesterday’s close: Settled at 1700.7, down 15.1
Silver, yesterday’s close: Settled at 25.461, down 0.925
Fundamentals: Gold and Silver broke sharply along with the Treasury complex yesterday. Although we do not believe this longer-term rally is done, and although yesterday’s break certainly makes a recovery much more difficult technically, a lot rides on today’s Nonfarm Payroll report. Expectations are for 182,000 jobs to have been added in February. Despite the rebound in economic activity, job growth has been the missing piece to the puzzle. A ‘hot’ read today will encourage further downside as it strengthens the U.S. Dollar and weighs on Treasury prices. (Please read our comments on Operation Twist in the S&P section)
Technicals: Gold and Silver got smashed through critical levels of technical support yesterday and this poses tremendous overhead damage that they must now repair. It would start with a close above 1704-1710 for Gold and a close above 25.97-26.15 for Silver. However, there is still strong support just below the market given their bull-market rallies through last year. This brings major three-star support 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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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.