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The Inflection Point has Arrived

By:

President of Blue Line Futures

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

S&P, yesterday’s close: Settled at 3873.50, down 29.50

NQ, yesterday’s close: Settled at 13,224.25, down 351.75

Fundamentals: Tech is getting slammed again. Yesterday, the NQ lost 2.5% and the added selling overnight is dragging the risk-environment lower. We have hammered home the rising rate narrative and how a high velocity move in the 10-year Treasury above 1.25% will tap a pain threshold at 1.50%. Tech is most vulnerable due to exorbitant valuations and debt ridden balance sheets. Rising Treasury yields force investors to question how much they are willing to pay for stocks. Speaking of debt-ridden balance sheets, Bitcoin has grabbed headlines as an investment across Tech companies like Tesla. Well, Bitcoin is down 15% this week and is certainly weighing on the landscape. Not all is negative though, Energies and Financials gained ground overnight after finishing +3.5% and +1.0%, respectively yesterday. In fact, the Dow is holding in positive territory at the onset of U.S. hours.

Fed Chair Powell begins his two-day Congressional testimony today at 9:00 am CT. Unlike his friendly Q&A sessions, he will be grilled on the state of the economy by representatives as they look to pass President Biden’s monumental $1.9 trillion stimulus package in the coming weeks. Powell has been dovish, he even brought bullish tailwinds two weeks ago that set the markets on pace for last week’s surge. However, just like our narrative turned cautious recently given that markets have priced the current landscape to perfect (arguably overpriced), can Powell be more dovish than he has been? This is a real concern for the risk-environment today and given the rise in Treasury yields, it justifies some of today’s selling as profit taking ahead of the biggest event of the week.

Also, on today’s economic calendar, Case Shiller Home Price Index is due at 8:00 am CT and Consumer Confidence follows at 9:00 am CT along with Richmond Fed Manufacturing.

Technicals: Both the S&P and NQ have extended their ranges lower, however, the NQ is clearly the leader and has now breached a trend line from the October low at 13,150. Given the decisive break below overnight and the impending gap lower on the intraday open, the stage is set for a path of least resistance lower. We do not have a major three-star support in the NQ until our rare major four-star at … Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and technical outlook, actionable bias, and proprietary levels for the markets you trade emailed each morning.

Crude Oil (April)

Yesterday’s close: Settled at 61.70, up 2.44

Fundamentals: Crude Oil set a new high overnight, pinging $63 exactly. However, the tape has already reversed into negative territory as the broader risk-landscape weighs on the tape. OPEC’s upcoming meeting and the potential return of production is certainly on the minds of traders but has taken a backseat to the distortions in Texas ahead of inventory data. The lost production in the region may take more time than initially thought to come back online and this led to the overnight surge. Early estimates for tomorrow’s EIA report expect -5.5 mb Crude, -3.5 mb Gasoline, and -4 mb Distillates. Overall, we welcome lower prices across the energy space from overextended levels; we want to be buyers from lower.

Technicals: Today’s reversal sets the stage for a failed high and a tail that would lead to added selling. Price action has broken below our momentum indicator at 61.65 and continued price action below here will weigh on the tape. First key support now comes in at … Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and technical outlook, actionable bias, and proprietary levels for the markets you trade emailed each morning.

Gold (April) / Silver (March)

Gold, yesterday’s close: Settled at 1808.4, up 31.0

Silver, yesterday’s close: Settled at 28.085, up 0.831

Fundamentals: Gold and Silver have pulled back from their overnight highs as risk-assets get slammed. Yesterday, both metals were able to ignore such broader weaknesses in order to act like safe havens. However, today’s concern is greater given the mounting losses across the equity space and the inability for the Treasury complex to respond. In fact, the 10-year is making a new session low with U.S. equity benchmarks on theirs. Furthermore, the U.S. Dollar is gaining ground as a safe haven and this is not a good near-term mix for metals. Ultimately, Fed Chair Powell begins his two-day Congressional testimony at 9:00 am CT and will rattle the landscape, a result that could force Gold and Silver to prove their resilience. Consumer Confidence is also due at 9:00 am CT.

Technicals: Gold’s surge through yesterday has so far failed right where you’d expect, at rare major four-star resistance at 1819-1823. What is disappointing though is Silver’s reversal after breaking above our dreaded major three-star resistance at 27.62-27.88. Now that Gold has tested our resistance for the first time and peeled back, we have reduced 1819-1823 to a major three-star. Both Gold and Silver are flirting with our momentum indicators this morning at 1807 and 28.00; this will be a point of balance that they must battle at in order to build for a recovery back to overnight highs. What we do not want to see is a close below … Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and technical outlook, actionable bias, and proprietary levels for the markets you trade emailed each morning.

Originally Posted on February 23, 2021 – The Inflection Point has Arrived

Disclosure: Blue Line Futures

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