The US dollar rises on inflation and rates ahead of Powell, states Bill Baruch of Blue Line Futures.

Here’s what we are watching:

  • Rising rates weighing on tech sector, NQ -1.5%
  • Rates rise on global central bank hawkishness, reopening post-Delta, reflation of the reflation trade, supply disruptions and energy crunch.
  • Energy crunch stokes inflation; Crude oil +3% on the week and nearing a high of year 76.98, Natural gas is +10% today and 22% on the week.
  • DX is at its highest since August 20th.
  • Fed speak continues. Congressional testimony from Fed Chair Powell is front and center. He is expected to “float the balloon” and inflation may not be as transitory as first thought.
  • Deadlock in Congress creating fear as we face a government shutdown on Friday, aiding the Treasury snowball.
  • St. Louis Fed President Bullard said inflation is likely to run at 2.8% through next year. “Large shock needed to throw off start of bond taper”. Expect two rate hikes in 2022. He was showing some signs of concern in speech. He is a 2022 voter.

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

S&P, yesterday’s close: Settled at Settled at 4433, down 12.75
NQ, yesterday’s close: Settled at Settled at 15,194, down 124.00

  • Price action down sharply in overnight. S&P and NQ both failed at big major three-star resistance levels at 4474.50-4477.25 and 15,326-15,360
  • S&P testing through big levels of technical support, now facing 4282.75-4484 and 4371.75. Break below here opens door to 4337-4343.25.
  • NQ Pivot is previous support at 15,009-15,033, must close above here or faces continued selling.
  • S&P 100-dma at 4325, NQ 100-dma at 14,600

Bias: Neutral

Crude Oil (November)

Yesterday’s close: Settled at 75.45, up 1.47

  • Crunch continues and energy extends
  • Brent hits high of 80.74 and took out front month high of year at 77.83 yesterday
  • WTI high of 76.67, front month high of year at 76.98
  • US crude stocks at 3-year lows and expectations for -2.33 mb on this week’s report
  • Rising momentum indicator at 75.70
  • Friday’s settlement aligns to create rare major four-star support at 73.58-73.98

Bias: Bullish/Neutral

Gold (December) / Silver (December)

Gold, yesterday’s close: Settled at 1751.4, down 40.7
Silver, yesterday’s close: Settled at 22.679, down 0.228

  • Different day, same story – US dollar and rate strength weighing directly on precious metals.
  • Continue to hold a negative near-term outlook, but a flush should bring a nice buy through Q1 2022.
  • Gold testing into next shelf of major three-star support at 1731.7-1737.4, no early bounce wearing on bulls.
  • Similarly, silver testing into 22.02-22.35 major three-star support

Bias: Neutral/Bearish

Learn more about Bill Baruch at Blue Line Futures.