We see similarities between June’s quarterly close and that for September, as well as the onset of the new quarter that followed, trading in the first few days of July and October, states Bill Baruch of BlueLineFutures.com.

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

S&P, yesterday’s close: Settled at 3794.00, down 9.25
NQ, yesterday’s close: Settled at 11,623.75, down 17.00

Fundamentals: US equity benchmarks took a violent turn south after May CPI data came in hotter than expected on June tenth. This forced a more hawkish hand from the Federal Reserve in the following days, and sentiment became excessively negative. Sound familiar? It should. Equity markets again sold off sharply on September 13, after August CPI data came in hotter than expected, and Fed rate hike expectations levitated in the aftermath. Yes, June did not finish on the dead low as September did on Friday, but patterns can evolve in a more extreme manner, not for the least of which because analytics are predicting such possibilities; downside and upside can be sharper, and therefore within a narrower timeline. The S&P rallied 3.6% from June’s settlement to a peak in five sessions, whereas it just surged as much as 6% over the last three trading days, the first of October. So where to now? The stage is set for another historic rally, just like July carried us through the start of August, but it is all about the data. Tomorrow brings a pivotal Nonfarm Payrolls report, but next Thursday’s CPI is 'make or break'.

Ahead of the August CPI report in September, the Morning Express was titled "Risks Are Skewed to the Downside". At this level, we see the exact opposite, and amid excessive negativity, portfolio managers are broadly offside, like the June CPI report released in July. Of course, tomorrow’s NFP will move markets, price action could be much higher or lower. However, like June’s CPI data in July was on the heels of a hot read for May, September’s read next week is the encore of that hot August read. In fact, June’s CPI was hotter across the board than expected, but markets refused to go lower because risks were skewed to the upside and excessive negativity.

Who would we be if we did not play devil’s advocate? One underlying bullish catalyst for the July through August stock market rally on the heels of hot June CPI was our main summer theme, "The Inflation Showdown at Jackson Hole". What was the direction of inflation heading into September? When June’s CPI was released on July 13, indicators had already signaled a significant slowdown for July's CPI. The difference this time is that early indicators for October's CPI appear to be trending hotter.

Initial Jobless Claims this morning helped jolt price action a bit higher after coming in at 219,000 versus the 203,000 expected. Later today there is a deluge of Fed speak, including Chicago Fed President Evans, Fed Governor Cook, Fed Governor Waller, and Cleveland Fed President Mester, all to begin at 1:00 pm CT.

Technicals: Yesterday, both the S&P and NQ rebounded strongly from the exact major three-star support levels we discussed here, “Holding construction starts and ends with major three-star support at 3732-3741.75 in the S&P and to a lesser extent 11,358-11,375 in the NQ.” Both indices went on to set a new swing high but again struggled to hold through European hours where the US Dollar has systematically gotten a bump. Additionally, at those elevated levels, there is significant overhead damage and resistance aligning with the aftermath of the September 21 FOMC meeting. With the Fed’s data dependence well known, the market has followed suit. Therefore, a healthy consolidation is perfectly fine through today’s session.

Crude Oil (November)

Yesterday’s close: Settled at 87.76, up 1.24.

Fundamentals: Another monster session for Crude Oil is in the books, marking a 10.4% gain on the week. The major catalyst came to fruition yesterday when OPEC+ agreed to cut production by two mbpd. However, the cartel had greater than 300% over-compliance in August, many countries are producing well below their caps. Effectively, this production cut is more in line with 900,000 bpd. Regardless, it is in direct competition with the White House liquidating the SPR and the Federal Reserve trying to tame inflation. The White House has expressed frustration with the decision and accused OPEC+ of aligning with Russia. At the end of the day, Saudi Aramco is enjoying record profits, and Russia, their ally and part of the cartel, is heavily reliant on Oil revenues after cutting Gas flows to Europe. On the other end of the spectrum, the White House has discouraged domestic production and aside from what the media says, we have an ear to the ground understanding of how difficult it is for Oil and Gas companies to gain fresh lines of credit. Yesterday’s weekly EIA inventory report was also very bullish with tremendous headline draws across the board and no movement on production. The icing on the cake was those types of draws despite more than six mbpd released from the SPR. In response to OPEC+, the White House said they will release another ten mbpd from the SPR in November. Soon enough, they will be buyers to replenish the reserves.

Technicals: Price action remains elevated and previous resistance is now support in defining a potential new bull leg at 86.24-86.69.

Gold (December) / Silver (December)

Gold, yesterday’s close: Settled at 1720.8, down 9.7
Silver, yesterday's close: Settled at 20.544, down 0.555

Fundamentals: Gold and Silver are in a wide consolidation range after ripping higher to start the week. Much of the strength is underpinned by short-covering, US Dollar weakness from a blow-off top, and a softer rate landscape. Ultimately, resistance has held, and price action is now waiting for tomorrow’s Nonfarm Payrolls report and next week’s CPI before deciding whether to take the next leg higher or retreat by allowing the bears to reposition.

Technicals: A reemergence of strength through last night retested significant levels of resistance in both Gold and Silver, defined below. However, the overall picture remains extremely constructive and the battle to rebound from yesterday’s lows to anchor to our Pivot and point of balance was crucial. We want to remain more Bullish in the near term as long as prices hold above rare major four-star support.

Learn more about Bill Baruch at Blue Line Futures.