Fed Day and Inflation


President of Blue Line Futures

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

S&P, yesterday’s close: Settled at 4169.25, up 18.25

NQ, yesterday’s close: Settled at 13,087.50, up 14.50

Fundamentals: It is Fed Day and whether the central bank wants to admit it or not, they are watching the stock market. Just a few weeks ago, we said the Federal Reserve should announce a 75-basis point rate hike and get it over with. Why wait until May 4th? Since then, the S&P has lost about 10% and many commodities have come in. Not only have Copper and Wheat shed about 10% from their April peak, but China’s lockdowns are a global deflationary event. Supply chains may face added bottlenecks, keeping prices elevated, but the Fed cannot control this in the near-term; hawkishness will not ease supply chain bottlenecks. The point being inflation is being tamed before our eyes. The one thing we know, narratives typically lose momentum when participants capitulate, and the magazine covers are printed. Inflation data for March was broadly contained relative to expectations already in place and as noted, asset prices have come in since; there is no need to shock the market anymore. Getting their key rate farther from zero to have added ammo for the future is another discussion altogether, but if the committee remained patient then, they should remain patient now. There are no quarterly economic expectations released today, but Fed Chair Powell holds a press conference after the 1:00 pm CT policy decision. We expect the Fed to hike by 50-basis points and considering mounting expectations for hawkishness, like inflation in March, we expect the committee to sound contained within those expectations.

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Technicals: Price action across U.S. equity benchmarks has not done anything wrong since our note yesterday, and nothing in our opinion has technically (or fundamentally) changed. However, given the Fed’s rate decision today and prices steadily contained below yesterday’s session high, we will reduce our Bias back to cautiously Bullish. We hope yesterday’s more Bullish Bias provided readers the confidence to buy into supports and/or our Pivots on weakness yesterday. If so, one would have had a terrific opportunity to capitalize. Our levels are broadly similar to yesterday, with the only real shift being the change and widening of our Pivot and point of balance in the S&P to align with the choppy contained range at … Click here to get our (FULL) daily reports emailed to you!

Crude Oil (June)

Yesterday’s close: Settled 102.41, down 2.76

Fundamentals: Crude Oil is sharply higher on a stew of news. After finishing on its backfoot yesterday, the private API survey’s larger than expected drawdowns brought bullish tailwinds into the new session. From there, the EU tightened their timeline to phase out Russian Oil by yearend. China’s lockdowns continue to pose a headwind, but the 7-day moving average slipping in Shanghai brings a light at the end of the tunnel. However, curbs in Beijing were extended to public transportation. OPEC+ lowered their demand growth forecast by 480,000 bpd. Still, the bullish factor remains the lack of spare capacity, and the OPEC Secretary General said, “there is not enough spare capacity in the world to replace lost Russian barrels.”

Technicals: Price action traded above $107 before retreating and digesting this morning’s rally. The run stopped just shy of major three-star resistance at 107.61-107.99, which was adjusted Monday to align with Friday’s failure. If you have followed our comments, our focused has been unfinished business all the way up to major three-star resistance at 111.07, with two levels between here and there. Look for price action to hold out above what is now first key support at … Click here to get our (FULL) daily reports emailed to you!

Gold (June) / Silver (July)

Gold, yesterday’s close: Settled at 1870.6, up 7.0

Silver, yesterday’s close: Settled at 22.665, up 0.081

Fundamentals: The struggles across Gold and Silver continue. A sign of life early yesterday proved to be no more than a dead cat bounce and a continued elevation in the 10-year yield at 3% certainly has the metals camp on their back foot. The U.S. Dollar also remains elevated, but has pulled back slightly ahead of the Federal Reserve’s policy decision at 1:00 pm CT. However, much of the U.S. Dollar weakness is attributed to hawkishness from other central banks and the USDCNH is flat.

Technicals: Gold is holding major three-star support at 1856.3-1858.4, and Silver out above its at 21.98-22.13. Yesterday’s construction was contained at first key resistance, and sellers have come back. Silver is violating what was first key support at 22.44 this morning, this is now our Pivot and point of balance. We must see a move in Gold back through … Click here to get our (FULL) daily reports emailed to you!

Originally Posted on May 4, 2022 – Fed Day and Inflation 

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