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Stocks Have "A" Bottom | Morning Express 05/23/22

Posted: May 23, 2022, 8:45 a.m.

Do not miss our Top Three Things this Week, out every Sunday.

- Friday was “A” bottom, price action held our rare major four-star support, and the S&P ripped by 2.4% back to finish unchanged. The rebound has run as much as 3.8% at today’s session high.

- The World Economic Forum kicked off yesterday and the world’s elite ascend on Davos, Switzerland.

- Not in Davos, President Biden made headlines from Tokyo.

o In a joint press conference with Japan’s PM, Biden was asked, "You didn't want to get involved in the Ukraine conflict militarily for obvious reasons. Are you willing to get involved militarily to defend Taiwan if it comes to that?"

o “Yes, it is a commitment we have made,” President Biden responded, in a clear break from the U.S.’s traditional policy of ambiguity.

o White House officials have walked back the comments saying what Biden meant was the U.S. would provide military equipment to Taiwan, not send troops.

- President Biden also said he is weighing cutting tariffs on Chinese goods while increasing calls for OPEC to raise production, citing the tariffs were not imposed by his administration.

- Shanghai emerges from lockdowns, slowly reopens. 7-day average is lowest since March 28th.

- Cases rise in Beijing to most on record, 7-day average new highs.

- Cases rise in port city of Tianjin, nears march scare.

- Keep an ear to the ground on developments and potential curbs at the two major cities.

- For now, risk-assets have responded positively to President Biden comments and Shanghai reopening.

- The Chinese Yuan has gained against the U.S. Dollar for three consecutive days and five of the last seven.

- German Current Assessment rebounds to best since October, while expectations six months out are best in three months.

- ECB President Lagarde signals a potential 50-bp rate hike by saying will likely end negative rates by end of third quarter. She is scheduled to speak tomorrow.

- Fed Chair Powell and Flash PMIs tomorrow

What’s Driving Metals? Do not miss our clip from Thursday’s Midday Market Minute.

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

S&P, yesterday’s close: Settled at 3899.50, up 1.75 on Friday and down 120.25 on the week

NQ, yesterday’s close: Settled at 11,840.75, down 37.50 on Friday and down 542.00 on the week

- Friday’s low was lowest since March 2021 for S&P and November 2020 for NQ.

- Rebound to settle 2.4% off low in the S&P back to unchanged, by 3.0% for NQ.

- The rip of lows comes amid massive Week 3 Option expiration.

- Not uncommon to see directional tailwinds develop on such expirations. Market maker must neutralize large short put exposure during amid weakness by selling stock, then must unwind.

- Leads us to believe market has found “A” bottom.

- Maintain cautiously Bullish Bias from these levels, would be more Bullish, but strong headwinds defined with major three-star resistance in our levels detailed below.

- Momentum indicator must buoy prices at 3915.50 in the S&P and 11,900 in the NQ.

- In order to remain constructive, we must see price action in both the S&P and NQ hold above major three-star supports aligning with Friday’s settlement at 3897.75-3899.50 and 11,840-11,870.

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NQ (June)

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Crude Oil (July)

Yesterday’s close: Settled at 107.04, down 2.59

- Saudi Arabia’s Oil Minister Prince Abdulaziz has resistance calls from U.S. White House to raise production, saying the cartel cannot just turn it on and turn it off.

- President Biden continues to use SPR in attempt to alleviate higher prices, adding they could release Heating Oil reserves.

- Shanghai reopening tailwinds, but Beijing remains a question mark.

- Strong resistance has developed at 111.82-112.39.

- Look for strong support to buoy weakness and keep momentum upward, defined as major three-star support at 108.63-108.96.

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Gold (June) / Silver (July)

Gold, yesterday’s close: Settled at 1815.9, down 3.0

Silver, yesterday’s close: Settled at 21.544, down 0.206

- What’s Driving Metals? Do not miss our clip from Thursday’s Midday Market Minute.

- Other than technicals, tailwinds coming from Chinese Yuan, gaining against the U.S. Dollar for three consecutive days and five of the last seven.

- Price action in Gold has exceeded major three-star resistance at 1856.3-1858.4, but this will remain a battleground, aligning with previous lows, and has slipped back below.

- Similarly, Silver stuck its nose above key resistance at 21.98-22.13.

- In order to remain near-term constructive, this morning’s pullback must battle to hold our momentum indicator, denoted as the Pivot and point of balance at 1848 in Gold and 21.89 in Silver.

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Silver (July)

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