Where Did Demand Go? 

By:

President of Blue Line Futures

– U.K., China, Hong Kong, Singapore, Russia, are among countries on Labor Day bank holiday.

– China PMIs for April on Friday night plummeted due to country’s zero-virus policy and lockdowns, state read Manufacturing contracted at 47.4 versus 48 expected and private Caixin contracted at 46.0 versus 47.0. Services came in at 41.9.

– Mass testing continues in Beijing, 7-day average of 43 new cases, closed gyms, cinemas, and banned indoor dining during the holiday that ends May 4th.

– Shanghai 7-day average daily new cases peaked April 19th at 3028, currently at 2184, down from 2379 on Friday.

– Given weak data and no progress on lockdowns, market sees as a negative. However, with China’s markets closed for holiday, they have no reason to make progress and allow other benchmarks to enjoy positive momentums.

– War rhetoric continues; EU meets in Brussels on phased ban of Russia Oil. Germany dropped opposition on Friday and was catalyst for Crude rally.

– German ramps pressure on Russia by training Ukrainian soldiers, noting it does not signal Germany has entered the war. Invites emerging market counties to G-7.

– Eurozone Manufacturing PMI final April improved to 55.5 from 55.3, but Consumer Confidence and Sentiment data erodes, missed expectations.

– Federal Reserve begins two-day policy meeting tomorrow, decision on Wednesday, with 99.8% probability of a 50 basis point hike (0.2% odds for 25-bps).

– U.S. ISM Manufacturing for April due at 9:00 am CT. This pivotal data point follows final SPGI Manufacturing PMI at 8:45 am CT. – China’s lockdowns and PMI data, Europe’s embargo, and Fed’s tightening, lead into OPEC+ decision on Thursday. Expected to increase production by 400,000 bpd, but with what spare capacity?

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

S&P, yesterday’s close: Settled at 4127.50, down 156.00 on Friday and 139.75 on the week

NQ, yesterday’s close: Settled at 12,852, down 602.75 on Friday and 501.50 on the week

– Friday was ugly and selling was heavy right into the bell. New low settlements for S&P, NQ, and Russell 2000.

– Panic setting in with indiscriminate selling taking hold on Friday. Is it enough? The front page stories are beginning to show up.

– Must Neutralize our near-term Bias due to close on Friday, but looking to reestablish cautiously Bullish upon firm settlement.

– Berkshire and Buffett hold annual shareholder meeting, bought most stock in more than a decade. Energy a focal point with large increase in Chevron as well as Occidental. Will Buffett’s confidence buoy today’s tape?

– March Fed meeting brought a choppy start to the week, but stocks finished very strongly. Was mounting expectations a hike of 75 basis points could be in the mix, market could see relief from only 50-bps.

– Measured downside is fully in play. Yes, we transitioned from cautiously Bearish to cautiously Bullish at 4160-4200, considering a floor at 4010-4030 is in play.

– Major three-star support at 4129.50-4138.75 has been violated and 4129.50 will now align with Friday’s settlement to act as a Pivot and point of balance on the session. Similar Pivot and point of balance for the NQ, noted in levels below.

– Given speed of selling late Friday, our momentum indicator lags the tape, need a break above and close above this level at … Click here to get our (FULL) daily reports emailed to you!

Crude Oil (June)

Yesterday’s close: Settled at 104.69, down 0.67 on Friday and up 2.62 on the week.

– OPEC+ production for April only rises only 40,000 bpd (supposed to be adding 400,000 bpd) due to outages in Africa.

– Compliance now reaches 164%, we noted last week we expect this to be much higher than the 135% in March.

– China data/lockdowns and fears Beijing will follow Shanghai’s footsteps is weighing significantly on global commodity landscape.

– Due to overcompliance, China uncertainties, Russia’s inability to produce, and outages in Libya. Will OPEC+ move forward with planned increase? Even if they do, the spare capacity is clearly not there.

– False breakout above two trend lines on Friday from March 7th and March 24th highs.

– Will face strong resistance at previous sticky 102.76-103.25 and strong support at 99.80-100.13.

– Pivot and point of balance most crucial on the session at … Click here to get our (FULL) daily reports emailed to you!

Gold (June) / Silver (July)

Gold, yesterday’s close: Settled at 1911.7, up 20.4 on Friday and down 22.6 on the week

Silver, yesterday’s close: Settled at 23.085, down 0.096 on Friday and 1.233 on the week

– Entire metals space is getting whacked to start the week in thin volume due to U.K. and China holidays.

– China’s poor PMI data and mounting lockdown fears adds pressure to the Chinese Yuan, loses ground to U.S. Dollar in 8 out of 10 sessions in 4.8% drop.

– With a weaker currency, China can buy less. Look for supportive action from China/PBOC when they come out of holiday May 4th.

– Gold breaks to lowest since February 16th and Silver since February 4th. Silver less than $1 from last year’s low and rare major four-star support.

– Gold breaks below major three-star support at 1877.7-1881, must regain this level to even begin neutralizing damage.

– Look for stability at and above major three-star supports in each at … Click here to get our (FULL) daily reports emailed to you!

Originally Posted on May 2, 2022 – Where Did Demand Go? 

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