The US 5-year yield is up 22 bps this month to its highest since February 2020 on inflation tailwinds and rate hike expectations, states Bill Baruch of Blue Line Futures.
- Curve flattening: the spread between the 5- and 30-year is the tightest since April 2020.
- CME Fed Watch Tool says a 50% chance of a rate hike by June 2022.
- Crude oil and copper march higher to start the week and push inflation narrative, despite China data.
- US dollar firm on rising rates and Covid talk as cases rise in UK and Russia
- Deluge of economic data from China disappoints: GDP YoY at 4.9% versus 5.2% expected, industrial production YoY 3.1% versus 4.5% expected, fixed-asset investment 7.3% versus 7.9% expected, but retail sales beat 4.4% versus 3.3% expected.
- From US, industrial production at 8:15 am CT and NAHB housing due at 9:00.
- Bitcoin trading is above $60,000, finding support from potential ETF approval. All-time high on Coinbase is $64,899 and futures $65,520. There is a micro-Bitcoin futures contract, 1/10 of one Bitcoin.
E-mini S&P (December) / NQ (December)
S&P, yesterday’s close: Settled at 4462.50, up 33.50 on Friday and 80.25 on the week
NQ, yesterday’s close: Settled at 15,134.50, up 97.25 on Friday and 326.25 on the week
- Strong session Friday, but soft close. Russell 2000 was +1% and finished -0.5% with all negative action coming in final 90 minutes.
- S&P closed above rare major four-star resistance on Friday, this is now support detailed below.
- NQ tested rare major four-star resistance at 15,165-15,200 on Friday and Sunday night, struggling so far.
- Price action in both S&P and NQ battling slightly below our momentum indicators.
- Buy opportunity in the S&P.
Crude Oil (November)
Yesterday’s close: Settled 81.73, up 0.96 on Friday and 2.97 on the week
- New swing high despite slate of weak China data detailed above. Also, due to energy crunch and outages, throughputs hit 16-month low of 13.4 mbpd.
- OPEC+ over-compliance at 115% for September, members struggling to bring back production. New underpinning latest leg.
- Russia production trending higher in October.
- Nord Stream Two front and center after Russia limits any extra gas through Ukraine in November. Dutch natural gas futures rise more than 10%
- November contract expires on Wednesday, not tradable after tomorrow. Could see squeeze into expiration. We have been noting $85 entirely possible into this.
- Price action opens strongly Sunday night, and trades through resistance.
Gold (December) / Silver (December)
Gold, yesterday’s close: Settled at 1768.3, down 29.6 on Friday and up 10.9 on the week
Silver, yesterday’s close: Settled at 23.349, down 0.128 on Friday and up 0.644 on the week
- Gold technical failure early Friday and had already broke 1775 before strong retail sales
- 30-year bond futures holding up relative to short-end but flattening curve does not bode well for precious metals. Especially behind a narrative of rates hikes.
- Continued action will encourage added selling.
Learn more about Bill Baruch at Blue Line Futures.