Yesterday’s data dump sent 30-year bond futures to the highest level since September, states Bill Baruch of 

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

S&P, yesterday’s close: Settled at 3945.75, down 63.75
NQ, yesterday’s close: Settled at 11,475.75, down 148.75

Fundamentals: Yes, there were tailwinds from a dovish Bank of Japan and slowing US inflation data (CPI last week, PPI yesterday), but there has been an undeniable safe haven bid due to data showing a deteriorating US economy. We are not in 2022 anymore, inflation is not rising precipitously, and the Treasury market is not forecasting endless Fed rate hikes. Although this creates a bond bid, much of it should have been discounted in Q4. There is a fine line between ‘bad news is good for risk assets, and ‘bad news is bad for risk assets’. Have we crossed into the dark side, where slowing economic growth without a Fed pivot will take down stocks? We do not know the answer yet, but bonds are beginning to say so. 

Today’s economic calendar brings weekly Initial Jobless Claims, fresh January Philly Fed Manufacturing, Housing Starts, and Building Permits. Fed Governor Collins spoke at 8:00 am CT, but Fed Vice Chair Brainard, maybe the most dovish committee member, says at 12:15 am CT. Her comments, especially at this juncture, will be critical.

Technicals: Price action slipped across indices yesterday, and the S&P settled right into a critical level of support at 3940. It has since taken that level out overnight, erasing all gains over the last week and trading into key support at 3911.75-3913.75. More crucial than the levels in which the index is breaching now is where it had failed over the last couple of trading sessions; the 200-day moving average comes in at 4010, and the rally ultimately became a back-test into the December 14 Fed fallout, and the gap settlement from that day at 4030, aligning with a critical .618 retracement back to the CPI blowoff top on December 13. Is this failure and move lower the beginning of a much larger sell-off? We do not know that right now, and all we can do is adjust our outlook as the ensuing sessions evolve. What we do know is that previous support is now significant three-star resistance at 3940-3945.75, and the S&P 500 (SPX) must close back above there in order to begin neutralizing yesterday’s action. To the downside, the NQ is testing major three-star support at 11,263-11,308, however, as we stated above, we are not in 2022 anymore, so this may not be a tech-led sell-off. We have two key levels of support in the S&P before a pivotal major three-star, in which a break below this level comes in.

Crude Oil (March)

Yesterday’s close: Settled at 79.80, down 0.65

Fundamentals: Crude Oil felt the shock of a slowing US economy yesterday and was pulled down along with other risk assets. At the same time, China’s reopening has been a bullish tailwind to start the year. But how much has been discounted? Especially after the run to a critical resistance area at $82, with the last leg powered by the OPEC+ and IEA Monthly Reports. Each highlighted a rebound in Chinese demand and a potential supply/demand imbalance if the world were to lose Russian barrels. At some point, the narrative has been fully discounted, and maybe that moment came yesterday. Please do not mistake us, a rebound in Chinese demand may be the catalyst to $90+, but not until the market actually realizes it.

Weekly EIA inventory data is due at 10:00 am CT. Expectations are for -0.593 mb Crude, +2.529 mb Gasoline, and +0.122 mb Distillates. There have been rumors of a rebound in Gasoline demand. How much SPR was released? Are we still seeing the regular end-of-year inventory distortions?

Technicals: Price action slipped to an overnight low of 78.45, below first key support at 78.87. A rebound this morning is retesting into the $80 market, which aligns with the local .382 retracement. Today will help define whether yesterday was a short-term pullback or the beginning of a larger consolidation lower. Continued action above or below our Pivot and point of balance, which aligns with our momentum indicator. 

Gold (February) / Silver (March)

Gold, yesterday’s close: Settled at 1909.9, down 11.8
Silver, yesterday’s close: Settled at 23.647, down 0.421

Fundamentals: A divergence between Gold and Silver continues. Gold is seeing an underlying safe-haven bid, underpinned by falling yields (discussed in the S&P/NQ section), whereas Silver is incurring pressures tied to deteriorating economic data. Regardless, the US Dollar’s inability to strengthen has kept a broadly stable picture for both. Today’s economic data was better than expected, with Initial Jobless Claims falling to the lowest level in nearly a year, Philly Fed Manufacturing coming in less bad, and a mix between Building Permits and Housings Starts. Boston Fed President Collins spoke at 8:00 am CT and said, “the Fed should raise the policy rate to just above 5%, and then hold it there for some time,” adding that, “it is appropriate to slow the pace of hikes, especially since the risks are now more balanced.” However, she added that “services inflation remains persistently high.” We now look to comments from Fed Vice Chair Brainard at 12:15 am CT, known to be one of the most dovish committee members.

Technicals: Price action in Gold has responded to major three-star support at 1902-1906.5, rebounding back towards resistance at 1921.7. Silver has not quite made it to major three-star support, highlighted below, but has responded to our key level at 23.20-23.32. As the rebound takes hold, our Pivot and point of balance, aligned with our momentum indicator for each will be critical in determining if the bulls will try to take things higher.

Learn more about Bill Baruch at Blue Line Futures.