The E-mini S&P and E-mini NQ futures incurred fresh selling pressures overnight, led by Asia with the Hang Seng -1.7% and hitting the lowest level since the second trading session of the year, states Bill Baruch of

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

S&P, last week’s close: Settled at 4087.50, down 12.25 on Friday and on the week.
NQ, last week’s close: Settled at 12,390.00, down 92.50 on Friday and up 43.75 on the week.

Fundamentals: Elsewhere, both the UK FTSE and German DAX pared early losses to remain at not only elevated levels but, in the FTSE’s case, record highs. From the UK, flash PMIs beat expectations across the board. In the Eurozone, Manufacturing PMI was dragged by a larger contraction than expected from Germany at -46.5. However, sentiment is improving via the ZEW Sentiment gauge, which looks six months out. Both Germany and the Eurozone topped expectations, coming in at the best level since the onset of Russia’s invasion of Ukraine. US flash PMIs are due at 8:45 am CT. As the week unfolds, Minutes from the Fed’s meeting earlier this month will be released tomorrow, the second look at Q2 GDP is out Thursday, and the Fed’s preferred inflation indicator, the Core PCE Index, is due Friday.

After a deluge of economic data showing a stronger economy and resilient inflation, the CME’s FedWatch Tool is signaling a 21% probability the Fed hikes by 50bps at their March meeting, the highest yet, with the remaining factoring in the discounted 25bps. Comments from Fed members this week will play a crucial role in the risk environment. The two-year yield is at 4.65%, the highest since November, and the ten-year yield is nearly 3.9% and testing the December high, each improving by more than 0.50% from their pre-Nonfarm Payroll low on February second. Although the 2s10s inversion has improved from a fresh record low -of 0.88% Wednesday, the strength in the short-end cannot be ignored.

Retail earnings are in focus this week, and Walmart, the world’s largest retailer, kicked things off alongside Home Depot. Both companies are -4% ahead of the bell after cautioning on the economy and lowering forecasts. Walmart did beat EPS and revenue estimates, whereas Home Depot missed revenues. Palo Alto Networks reports after the bell today, along with Realty Income, Diamondback, Coinbase Global, Caesars, and others. Tomorrow, NVIDIA headlines after the bell.

Technicals: Price action across the indices is on soft footing ahead of the bell, with the E-mini S&P and E-mini NQ setting fresh lows. The E-mini Dow is testing below Friday’s opening bell range on early weakness from WMT and HD. Notably, the NQ pinged the 21-day moving average on Friday for the first time since clearing it on January tenth. Last week, we pointed out a similar stretch from July 15 through August 22. Whereas the NQ held this indicator into a close, the S&P did settle below it for the first time since January 5th. Is this the start of an August-September type correction? Two broad differences between then and now are the October capitulation and the constructive breadth since. Still, a pullback of some sort would be healthy and help clear out recent froth. First things first, we have rare major four-star support.

Crude Oil (April)

Last week’s close: Settled at 76.55, down 2.19 on Friday and 3.37 on the week.

Fundamentals: An uncertain geopolitical landscape and demand from China’s reopening have helped underpin a rebound to start the week from last week’s selling. Tensions between the US and China are not improving as President Biden made a surprise visit to Kyiv and is expected to speak in Poland today. Data shows exports of Russian Crude and fuel to China hit a fresh record, beating that from April 2020 when China emerged from the initial virus restriction, from @staunovo on Twitter. Sticking with the Russia Oil export story, although China’s demand remains robust upon their reopening, this news, along with other reports, shows more Russian Oil is in the market than anticipated post-sanctions, and this could prove to be a negative of sorts. However, a string of economic data from the US, UK, and Eurozone over the last week show a better economic picture than what may have been calculated a few weeks ago. Weekly inventory data is delayed by one day due to yesterday’s US holiday.

Technicals: Crude Oil slipped sharply on Friday, hitting a ten-day low before rebounding into a settlement. Price action has yet to retest that low of 75.32 during holiday hours, which can also prove to be a volatile environment as the previous contract (March) falls off the board. Friday’s settlement of 76.55 managed to hold major three-star support at 75.75, a level that has buoyed the tape to start the week. However, a decisive move back below here could open the door to our next major three-star support.

Gold (April) / Silver (March)

Gold, last week’s close: Settled at 1850.2, down 1.6 on Friday and 24.3 on the week.
Silver, last week’s close: Settled at 21.715, up 0.005 on Friday and down 0.36 on the week.

Fundamentals: Gold and Silver have shown life from Friday’s overnight low as the US Dollar retreated from such highs. However, rising rates are proving to be a headwind to a larger dead-cat bounce from the two-week bludgeoning. As we noted in the E-mini S&P/NQ section, the two-year yield is at 4.65%, the highest since November, and the ten-year yield is nearly 3.9% and testing the December high, each improving by more than 0.50% from their pre-Nonfarm Payroll low February second. This comes as the Federal Reserve is seen stepping up its hawkishness, with rates now pricing in a 21% probability the Fed hikes by 50bps in March. The other side of this extrapolation would pave the way for the Fed to force a slowdown and create an environment where Gold and Silver can thrive. For now, we look to US flash PMIs at 8:45 am CT and a week full of Fed speak.

Technicals: Silver is improving a bit better than Gold this morning and trading in positive territory. That may be some of its industrial characteristics as Copper surges by more than 2% after battling to hold the $4 mark last week. An improvement is certainly welcomed by the bull camp, and Gold held major three-star support at 1838.8-1842.2 on today’s holiday session; continued construction above here will open the door for a rebound.

Learn more about Bill Baruch at Blue Line Futures.