US stock indices have been grinding higher since slipping into and bottoming through Monday’s opening bell, states Bill Baruch of BlueLineFutures.com.
E-mini S&P (June) / E-mini NQ (June)
S&P, yesterday’s close: Settled at 4136.25, up 4.25
NQ, yesterday’s close: Settled at 13,158, down 12.75
Fundamentals: E-mini S&P and E-mini NQ futures pared losses into the final minutes of yesterday’s session and poked above Friday’s holiday Nonfarm Payroll highs after the European open. Underpinning the latest breath of this risk-on move was New Loans data for March out of China at 3:30 am CT, which came in as the second highest on record, only behind January. In our opinion, we have yet to feel the full impact of China’s reopening, and this data is a precursor. One might scream, “But the inflation!” Last night, CPI data for March from China came in at -0.3% versus the +0.5% expected. Yes, disinflation, and yes, one could argue New Loans have yet to percolate through the economy. However, there will be the crosswind of easing supply chains, which allows Chinese regulators to stoke growth.
This leads to tomorrow’s US CPI data for March, and Wednesday’s PPI, both of which have shown signs of cooling. E-mini S&P and E-mini NQ futures have been rangebound leading into this critical read, as seen in a failure to continue the end of Q1 run-up and the response to waves of selling into 4100 for the S&P and 13,000 for the NQ. Expectations for headline CPI are +0.4% m/m, down from +0.5% in February, and 5.6% y/y, up from 5.5%. The Cleveland model suggests +0.3% m/m and 5.22% y/y. For Core CPI, analysts expect +0.2% m/m, down from +0.4% in February, and 5.2% y/y, down from 6.0% and the lowest since May 2021. The Cleveland model forecasts +0.45% m/m and 5.66% y/y. There are clear expectations for inflation to temper. While some may ask, by how much? The real concern is how much cooling is already discounted, and are risks now skewed to the downside (for the market) in the case of something only negligibly hotter? This will be answered tomorrow, but we are hopeful, and our models point to cooling. Furthermore, we firmly believe that producer prices are a leading indicator of consumer prices, and PPI has shown signs of disinflation in two of the last three months.
What we do know is critical, this bull market has shown leadership from high-quality tech, and yesterday’s strength within the semiconductor space cannot go unnoticed. News of slowing PC demand in the first quarter, headlined by Apple's -40%, could have crippled the market. Instead, semiconductors did not focus on lagging Q1 data, they focused on the Samsung news, cutting chip production, and the impact it will have into 2024. That is just it; leadership is looking past the next few months because they told us the first half of 2023 will be awful. That is something we are confident the market has discounted.
Today, the US Treasury will auction $40 billion in three-year Notes at noon CT and $32 billion in ten-year tomorrow. We also look to Fed comments from Chicago Fed President Goolsbee at 12:30 pm CT, Philadelphia Fed President Harker at 3:00 pm CT, and Minneapolis Fed President Kashkari at 6:30 pm CT which are 2023 voters.
Technicals: Price action in E-mini S&P and E-mini NQ futures has responded for three straight (non-holiday) sessions at major three-star support at 4099-4103.25 and 12,980-13,011, respectively. This is very encouraging for the bull camp as it builds out a healthy consolidation and, by some considerations, a sloppy flag-like pattern. In the E-mini S&P’s case, it is out above the March highs, and for the E-mini NQ, it is also about above the February highs. Despite the constructive nature of this price action, there is still an overhead supply each index must chew through. The S&P faces major three-star resistance at 4141.50-4146.50, aligning multiple levels and the spike highs from Nonfarm Payroll before other levels detailed below. Of course, the NQ has created resistance at the spike high into quarter-end, which aligned perfectly at our resistance and adjusted to 13,303-13,311, but before that, we must see a close above what is now major three-star resistance.
Crude Oil (May)
Yesterday’s close: Settled at 79.74, down 0.96
Fundamentals: Crude Oil is incurring a bit of pressure this morning despite reports from Bloomberg that Russian flows dropped by 1.24 mbpd last week, the biggest weekly decline since storms in mid-December, and from SPGI that Chinese independent refiners imported a record of the discounted Urals in March. This leads to inventory data with expectations released throughout the day and highlighted by API at 3:30 pm CT. Early estimates are for -1.3 mb Crude, -1.5 mb Gasoline, -0.75 mb Distillates, and +0.13 mb at Cushing.
Technicals: While we remain cautiously Bullish, we have advocated remaining prudent; getting more Bullish in Bias is hard until a close above $83, and there is certainly unfinished business lower. Despite that unfinished business, Crude has battled at major three-star support at 79.65-79.79 exceptionally well, holding on for settlement yesterday, and this could be setting the stage for higher prices.
Gold (June) / Silver (May)
Gold, yesterday’s close: Settled at 2003.8, down 22.6
Silver, yesterday’s close: Settled at 24.912, down 0.181
Fundamentals: Gold and Silver have done absolutely nothing wrong and furthermore have responded to waves of selling that many times have broken the tape. Especially considering Gold’s response to the banking crisis and how some of those fears have dissipated, yet Gold is clinging to the gains. Although we find this incredibly encouraging, we are reducing our more Bullish Bias in order to exude prudence ahead of tomorrow’s CPI report, details of which are in the S&P/NQ section. Continued resilience will be critical through the end of this week, which would set the stage for higher prices. Today, we look to Fed speak from Chicago Fed President Goolsbee at 12:30 pm CT, Philadelphia Fed President Harker at 3:00 pm CT, and Minneapolis Fed President Kashkari at 6:30 pm CT; all are 2023 voters.
Technicals: Given the healthy consolidation, the levels below for Gold and Silver are little changed. Price action responded to a scare yesterday, the bulls defended support and took the tape back to first key resistance in each. This sets the stage for our Pivot and point of balance, and continued action above these pockets.
Learn more about Bill Baruch at Blue Line Futures.