As of Tuesday, the S&P 500 (SPX), Nasdaq (NDX), and Dow (^DJI) have surrendered all gains since the Federal Reserve’s July 27 policy meeting, states Bill Baruch, president of

(And, what a trading range it has been! Congrats to all who followed in both directions.) As one could gather, our theme this week is data dependence. US benchmarks were slammed on the opening bell yesterday but added selling certainly came on the heels of surging JOLTs Job Openings and Consumer Confidence. The much stronger than expected data was contrary to Fed Chair Powell’s Jackson Hole speech on Friday, where he said, “Restoring price stability will take some time and requires using our tools forcefully to bring demand and supply into better balance….While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses.” With this in mind, August jobs data is in the spotlight, and we get a glimpse via the newly reengineered private ADP survey yesterday morning.

Although it showed job growth sharply below expectations at 132k versus 288k, wages appear to have surged by +7.6% YoY. Nonfarm Payrolls expect this figure to be +5.3%. Regardless, we do not believe anyone is making intermediate-term trading decisions on the return of ADP today, given that ISM Manufacturing is due tomorrow and Nonfarm Payrolls round out the week on Friday. Cleveland Fed President Mester, a 2022 voter, beat the same drum, saying, “It is far too soon to conclude inflation has peaked and the hike size at any meeting hinges on inflation.” The Cleveland Fed Inflation Nowcast, as of yesterday’s update, expects MoM headline CPI to remain subdued for August at +0.09% but elevated on a yearly basis at 8.28%. CPI is due on September 13 and the Fed begins its two-day meeting one week later.

Price action found footing yesterday at the one-two punch of technical support between the S&P’s 50% retracement and the NDX’s trend line from its low. For the S&P, this aligned to create major three-star support at 3983.25-3994.50, so it is no coincidence the index settled at 3987.50. The NDX has a rising trend line from its June 16 low that was pinged perfectly yesterday and aligns with yesterday’s low to create major three-star support at 12,247-12,280 today. While these levels of support are crucial, both indices are holding below their 50-day moving averages at 4016.75 and 12,547.

Crude Oil posted its worst session since July 12 and exuded a tape like the middle of June’s rollover. Fear the Federal Reserve would engineer a recession at all costs in order to get inflation down created a broad commodity meltdown in the middle of June. Are we at the onset of a similar event? The difference now is at that time Crude Oil front month stood at $120 and October at $115. On the opposite side of the Fed is a clear desire from Saudi Arabia to keep the price of Brent above $90.

Remember, with elevated energy prices, Saudi Aramco earned a record $50 billion in its latest quarter-end. They are unlikely to surrender this trend willingly. Price action slipped to an early morning low of 88.27, but OPEC+ production data helped spark a rebound. A Reuters survey showed the cartel underproduced by 1.4 mpbd in August versus 1.3 mbpd in July.

As Bill Baruch noted in yesterday’s Midday Market Minute, the break below major three-star support at 92.96-93.35 Neutralized our Bias. The reversal after achieving our upside target of 96.75-96.85 was vicious and although we remain very upbeat over the long-term, near-term risks certainly outweigh such. Overnight weakness shredded through the 21-day moving average at 90.71 but responded to major three-star support at 87.69-88.18.

Gold and Silver have taken their next leg lower with Silver now trading at the lowest level since June 2020. On Sunday night, we sent out a note to all readers that we have gone cautiously Bearish Gold and Silver due to a bear-flag failure and Fed Chair Powell’s overarching hawkishness. We added how we found value in the September Week 2 Puts in Gold for $600 or less. Although the US Dollar Index has yet to officially break out, mostly due to a stabilizing Euro, the US Dollar has broken out against the most important pair of metals, the Chinese Yuan. This relationship is something that we often reference here. We believe there are two other factors weighing on the metals. First, it has not been uncommon for Gold and Silver to incur end-of-the-month selling. Additionally, the Treasury complex is gearing for a low end-of-the-month settle and rising yields weigh heavily on the precious metals complex.

Both Gold and Silver have decisively broken below their July 27 gap levels, and we find this very bearish in the immediate term. We view continued price action below what is now major three-star resistance at 1737.5-1740 in Gold and 18.60-18.83 in Silver.

Learn more about Bill Baruch at Blue Line Futures.