The Recessionary Data Undertow | Morning Express 08/15/2022

Posted: Aug. 15, 2022, 8:35 a.m.

- Do not miss our Top Things to Watch this Week, out every Sunday.

- A slate of economic data last night from China, for July, set an ugly tone to start the week; Industrial Production YoY +3.8% versus 4.6% expected, Fixed Asset Investment +5.7% versus +6.2%, Retail Sales +2.7% versus 5.0%, and House Prices fell by 0.9% for their third straight monthly drop. Although the Unemployment Rate beat at 5.4% versus 5.5%, youth unemployment lingers at 19.9%.

- The PBoC acted swiftly to boost sentiment and cut the one-year prime loan rate by 10-bps. This is their first such move since January and although small, it makes an impression right after officials talked down the idea of fresh stimulus or easing just last week.

- The U.S. Dollar has strengthened against the Yuan by 0.80%, the largest one-day move since back-to-back 0.81% and 0.82% on May 25th and 26th.

- The U.S. Dollar is strengthening broadly with the Dollar Index up by 0.60%, and is a direct hit to risk assets.

- Elsewhere, Iran seems to be coming to the table to revive the Nuclear Deal but noted dependence on U.S. flexibility. The are expected to officially respond to the EU tonight.

- This is a one-two punch (China data and Iran deal) rattling Crude and products, after price action in Crude Oil failed at the 21-dma Thursday and Friday.

- NY Empire State Manufacturing, fresh for August, with a massive miss at -31.30 versus +5.50 expected.

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September Crude Oil with February 25th gap on weekly close highlighted.

 

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10-year futures did not break trend line as decisively as the 30-year.

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

S&P, yesterday’s close: Settled at 4281.00, up 71.25 on Friday and 134.25 on the week

NQ, yesterday’s close: Settled at 13,577.75, up 266.50 on Friday and 349.00 on the week

- Friday’s melt higher embodied exactly what happens when shorts are squeezed during the heart of summer. From 10:00 am CT through close, every 30-minute bar in the S&P was firmly positive but two. Of those two, one was flat, and one was a 0.25 loss.

- A new week brings reason to consolidate and if nothing throws it off, the melt-up continues. Last night’s ugly slate of data from China can be enough to throw it off. Will price action chew through supports?

- For us, we have remained cautiously Bullish in Bias since mid-May (after being Bearish from the start of the year) exercising objectivity on when to capitalize on rallies. We believe it is time to watch a round or two given many factors, not least of which is the proximity of the 200-day moving average in the S&P, the squeeze that took place through Friday, and China’s data. We are eager to reinvigorate our Bullishness.

- Price action in both the S&P and NQ is battling very well at our Pivot and point of balance, aligns with our momentum indicators. Continued construction here will keep the tape elevated and technically pave the way for higher prices.

- Decisive action below our Pivot and point of balance will encourage a move into major three-star supports at 4209-4210 and 4197.75-4204.75 in the S&P and 13,311-13,359 in the NQ.

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NQ (September)

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Crude Oil (September)

Yesterday’s close:   Settled at 92.09, down 2.25 on Friday and up 3.08 on the week

- Ugly slate of economic data from China also includes that July refiner Crude throughputs fell to lowest since March 2020. Remember this comes after New Loans data whiffed on Friday.

- Iran Nuclear Deal back on the table. Iran expected to respond to EU tonight.

- Crude has been bludgeoned and today’s U.S. NY Empire State Manufacturing whiff is likely not going to help.

- Price action has decisively broken below the 87.56 mark, which will now serve as our Pivot and point of balance

- We have three waves of major three-star support listed with the most crucial being 83.60, the gap from February 25th.

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Gold (December) / Silver (September)

Gold, yesterday’s close: Settled at 1815.5, up 8.3 on Friday and 24.3 on the week

Silver, yesterday’s closeSettled at 20.698, up 0.349 on Friday and 0.856 on the week

- USDCNH is the most crucial pair and thus chart for metals, especially overnight.

- Bonds getting a two-day bid after breaking trend line on Thursday, only positive for precious metals right now.

- Gold should wake up to awful NY Empire State Manufacturing, and a failure to do so could signal further weakness ahead.

- A battle underway at our Pivot and point of balance, highlighted below.

- Momentum indicators are significantly trailing the tape. Tape must consolidate and allow momentum indicators to catch up in order to even begin signaling exhaustion. Will highlight in the Midday Market Minute this afternoon.

- Major three-star supports in Gold, two waves, come in at 1783.4-1785 and 1774. Must hold out above here in order to keep recent construction together.

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Silver (September)

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