Equities Strength Before Fed & Earnings Week | Morning Express 07/22/2022

Posted: July 22, 2022, 9:11 a.m.

- If you thought the last two weeks were jam-packed with news, wait until next week.

- Next week is the heart of earnings season. To name a few, Microsoft, Alphabet, Visa, Coca-Cola, McDonald’s and more report on Tuesday. Meta and Qualcomm are Wednesday. Apple, Amazon, Mastercard, and Pfizer are Thursday. Exxon, Chevron, Proctor & Gamble, and AbbVie report Friday.

- The Federal Reserve begins their two-day meeting on Tuesday and concludes with a policy announcement Wednesday at 1:00 pm CT. They are expected to hike rates by 75-basis points with what now sits at a 75% probability. There is a 45% probability the bank hikes by 75 next week and follows with another 75 in September.

- Prices have come down and will contain the rise in inflation, but shelter, which accounts for one third of CPI, remains the elephant in the room. The calculation for shelter lagged the real prices of homes through 2021 and is no catching up. Philly Fed Manufacturing yesterday showed Price Paid dropped from 65.5 in June to 52.2 in July. This is within a headline number at -12.3 for July. Before June’s -3.3, this read has not been in negative territory since May 2020.

- Yesterday, the ECB hiked rates by 50 basis points, bringing the deposit rate to 0% in their first hike since 2011. Consensus was expecting a hike by 25 basis points, so the move did initially spike the Euro. The bank also announced a new program aimed to counter fragmentation across sovereign debt called the Transmission Protection Instrument (TPI). ECB President Lagarde’s press conference subsided the spike in the Euro, but the overall buoyancy is likely the factor of the bank coming together and not becoming more divided. Similar to their stimulus package in 2020 that supported the currency instead of weakening it.

- Flash PMI day, the Eurozone Manufacturing unexpectedly contracted with 49.6 versus 51.0.

- U.S. Flash PMIs on deck 8:45 am CT.

Breaking: U.S. Flash PMIs mixed with Services whiff at 47.0 versus 52.6 and Manufacturing firm at 52.3 versus 52.0. Old saying is, Services PMI is last to drop in recessionary conditions.

What about Platinum?

Platinum has been trending lower for more than four months, the March peak, and is finally showing signs of a potential bottom. Yesterday's whipsaw helped complete the right shoulder of an inverse head and shoulders pattern. Upon doing that, it also back-tested the trend line from its June peak, holding it as support perfectly. The large range consolidation over the last three days created a flag-like pattern, brining a coiling of strength to help pierce through the 21-day moving average this morning. The cherry on top is that Managed Money, hedge funds, have been net-short Platinum . This tells us that upon strength there will be short-covering. Not only in Platinum but Silver and Gold too. In fact, Managed Money went net-short Gold as of last Tuesday for only the second instance in history. The first was at the exact 2015 low and the second was in the later innings of the 2018 sell-off. Managed Money going net-short metals is a contra indicator.

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

S&P, yesterday’s close: Settled at 4001.25, up 38.75

NQ, yesterday’s close: Settled at 12,640.00, up 174.75

- A refusal to go lower on negative news from CPI and PPI last week through Apple on Monday sparked a massive wave of short covering.

- Testing into rare major four-star resistance at 4017.50-4019, manage your long position into here, we certainly are.

- Previous resistance is now support and bulls are driving this wave as long as price action can hold above major three-star support in the S&P and NQ at 3950-3959 and 12,358-12,373.

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NQ (September)

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Crude Oil (September)

Yesterday’s close: Settled at 96.58, down 3.23

- India’s demand for Gasoline and Distillates hit a record high in June

- Flash PMI day, the Eurozone Manufacturing surprise contraction reinvigorates recession fears and weighs on the energy complex. U.S. on deck 8:45 am CT.

- First key resistance at 98.16 held.

- Pivot and point of balance same as yesterday, previous support, at 96.52-96.97.

- Major three-star support is the battleground staving off selling at 94.23-94.57.

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Gold (August) / Silver (September)

Gold, yesterday’s close: Settled at 1713.4, up 13.2

Silver, yesterday’s close: Settled at 18.668, down 0.045

- Outside bullish engulfing pattern in Gold yesterday paves the way for strength and a short-covering rally.

- Platinum note above.

- Treasury complex is firm with the 10-year yield breaking through 2.75%.

- U.S. Dollar Index is soft and making new lows after a whiff on Services PMI 47.0 versus 52.6 expected. Manufacturing beat at 52.3 versus 52.0. Old saying is, Services PMI is last to drop in recessionary conditions.

- Shorts will be forced to cover upon a move above major three-star resistance in Gold and Silver at 1735.5 and 19.19-19.28.

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Silver (September)

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