US equity indices are little changed, but price action has softened from its best levels through the European open, with each the E-mini S&P and E-mini NQ trading below yesterday’s low, states Bill Baruch of

S&P, yesterday’s close: Settled at 4007.25, up 6.00
NQ, yesterday’s close: Settled at 12,788.50, down 101.75

Fundamentals: Globally, the US Dollar Index basket has surrendered some ground due to the Euro strengthening on hawkish ECB comments and better-than-expected Italian and French Confidence data. The Aussie is higher after firm Retail Sales, and the Japanese Yen is stronger despite firmer yields. The US two-year yield has crawled back above 4.0% and the ten-year to 3.56%, each touching a four-day high.

Bloomberg highlighted comments from BlackRock strategist Wei Li, who wrote in a client note the Fed would keep raising interest rates despite banking fears, essentially saying markets are offside. In recent weeks, our data-dependent opinion has evolved to expect only one more 25bps hike and a high likelihood of nothing at the committee’s next meeting in May. The CME’s FedWatch Tool signals no hike with a 54% probability. Remember, the Fed is hiking rates to fight inflation, and rising base comparisons beginning in March will bring a helping hand. Although inflation rose steadily in Q4 2021, it accelerated in March 2022 by 1.2% m/m (headline) due to Russia’s invasion of Ukraine, the sharpest m/m rise in headline CPI since September 2005 and a level before that only achieved in 1980. In fact, through all of last year, only June’s +1.3% was higher. This surged y/y headline CPI by 8.5%, a level only topped in May and June 2022. With that said, the Cleveland Fed Inflation Nowcast expects y/y headline CPI to rise by 5.22%, which would be the slowest since May 2021, and m/m by +0.3%. On Friday, we get the Fed’s preferred inflation indicator, the Core PCE Index, for February. However, the focus has likely already shifted to next week’s Nonfarm Payrolls report and the April 12 CPI data.

On the economic calendar, Case Shiller was due at 8:00 am CT, and CB Consumer Confidence followed at 9:00. We will hear from ECB President Lagarde at 8:15 am CT, and Fed Vice Chair of Supervision Barr at 9:00 am CT, who testifies before Congress. The US Treasury will auction $43 billion five-year Notes today at noon CT and $35 billion seven-years tomorrow. After the bell, we look to earnings from Micron, a crucial one for the semiconductor space, and Lululemon.

Technicals: Price action has not done anything wrong; E-mini S&P futures are holding out above Friday’s late strength, and the E-mini NQ has held the floor we spoke of here yesterday, defining our more Bullish Bias at 12,688-12,715. Regardless, given Friday’s late strength and three rally attempts into major three-star resistance at 4031.50-4035.75, the soft tape is disappointing. Therefore, we will reduce our more Bullish Bias but remain cautiously optimistic. Not only has E-mini S&P been contained by that aforementioned resistance, the E-mini NQ quickly surrendered the critical 12,884 mark yesterday morning and has yet to make a strong attempt to recover it. We want to re-emphasize the market has done nothing wrong, and today’s reception of first supports through the open will be critical for the S&P and NQ.

Crude Oil (May)

Yesterday’s close: Settled at 72.81, up 3.55

Fundamentals: Crude Oil had its best day since May yesterday on a barrage of small news-fueled excitement that was gained over the weekend on the CFTC’s Commitment of Traders data. Ultimately, traders build confidence in under-crowded trades, and Friday’s CoT data showed the lowest Managed Money Net Long position since 2016. According to UBS, the liquidation over the last two weeks was the sixth fastest pace since 2011. So, was yesterday’s move a flash in the pan, or are there legs? We cannot ignore the overhead technical resistance, highlighted in our Technical section below, but an early theme this year that has recently dissipated until yesterday was China’s reopening. The CNPC, a Chinese state think tank energy group, yesterday projected throughput to rise 7.8% in 2023, reversing a decline from last year. They further said this equates to growth in imports by 6.2%. This accompanied the most impactful news, that Turkey suspended exports from the semi-autonomous Kurdistan region through a pipeline to the Mediterranean, respecting a decision by Iraq after winning an arbitration case. This puts 450,000 bpd in question.

Technicals: Price action ran straight into our aforementioned target of 72.70-73.42, a level that we highlighted as an expectation through midweek last week, upon a constructive path. Our momentum indicator is rising and denoted as our Pivot and point of balance below; price action above here will feed higher prices. If this level is surrendered decisively, it will signal some near-term exhaustion and open the door to a consolidation back to major three-star support.

Gold (April) / Silver (May)

Gold, yesterday’s close: Settled at 1953.8, down 30.0
Silver, yesterday’s close: Settled at 23.145, down 0.194

Fundamentals: Gold is on the mend and trying to drag Silver higher after a disastrous start to the week, highlighted by a reversal of as much as $61.5 or 3.1% from Friday’s high of 2006.5. A broadly weaker US Dollar coupled with technical support has helped lift the metals complex. Additionally, the move across rates in recent weeks underpins a broadly supportive narrative and one that could see the rates edge higher while not hindering our outlook for Gold and Silver. Case Shiller Home Price data was more or less in line with expectations, next up is CB Consumer Confidence at 9:00 am CT. We will hear from ECB President Lagarde at 8:15 am CT, and Fed Vice Chair of Supervision Barr at 9:00 am CT, who testifies before Congress. The US Treasury will auction $43 billion five-year Notes today at noon CT and $35 billion seven-years tomorrow.

April options expire today for both Gold and Silver. This is a big expiration for Gold and could remove a ceiling of sorts at the $2000 mark, though there must be a catalyst to reinvigorate price action to that level. 

Technicals: The technicals have been straightforward. Last week’s plunge in Gold responded to our critical area of support perfectly at 1936.4-1938. Weakness over the last 24 hours has responded to a higher low and the lift-off point of the FOMC meeting at 1948.3-1950. This is building to be a higher low than last week, while Silver battles to hold $23 after outpacing Gold through that time. Price action in Gold is trading above our Pivot and point of balance, which aligns with our momentum indicator and is highlighted below. While that favors the bull camp, we do have three heavy lines of major three-star resistance overhead.

Learn more about Bill Baruch at Blue Line Futures.