Equity markets erased early post-NFP gains on Friday after Russia’s Gazprom said the Nord Stream One pipeline will remain closed for repairs, notes Bill Baruch, president of BlueLineFutures.com.
Gazprom’s announcement ironically came only hours after the West agreed to price caps on Russian Oil and has since admitted flows will not resume until sanctions are lifted.
A full shutdown of Nord Stream One would reduce Eurozone GDP by 1.5-2% in 2023—Fitch.
Nonfarm Payrolls topped expectations at 316k versus 300k and Wage Growth was soft at +0.3% Mom vs +0.4% expected and +5.2% YoY vs +5.3%. The participation rate increased to 62.4% and the unemployment rate rose from 3.5% to 3.7%.
S&P 500 (SPX) held a critical area of support 3902-3923.25, helping to encourage a consolidation through holiday trading.
OPEC+, on Monday, announced it will reduce production by 100,000 bpd. Other than a headline knee-jerk higher, the impact is minimal as the cartel is already producing 2.8-2.9 mbpd below their target.
New virus cases were detected in Shanghai, adding one high-risk area and two middle-risk areas.
Commodities are feeling the impact of the Shanghai news
Europe’s plan to limit energy consumption certainly has weighed on price sentiment this morning, but we believe selling in Crude Oil is more attributed to the virus news in China and the Yuan weakness that followed.
Asian currency fallout, the Yen is at the weakest level against the U.S. Dollar since August 1998, before futures were available.
US ten-year yield is hanging at the highest since 3.31% on June 21st.
Services data divergence is front and center. The final August SPGI read is due at 8:45 am CT and is expected to hold deep contraction at 44.3 after 47.3 in July. However, the ISM is due at 9:00 am CT and is expected to expand again at 55.1 after surprising with a 56.7 in July.
China Trade Balance is due tonight at 10:00 pm CT.
E-mini S&P (September) / NQ (September)
S&P, yesterday’s close: Settled at 3924.50, down 44.25 on Friday and 135.00 on the week.
NQ, yesterday’s close: Settled at 12,104.25, down 188.00 on Friday and 516.25 on the week.
Precipitous selling Friday afternoon stopped on a dime at major three-star support at 3902-3908.25. After holding earlier in the week this area was revised from rare major four-star support at 3902-3923.25.
A similar area of support in the NQ stands at 12,031-12,089.
These are viewed as the line in the sand, and a close below will bring the next leg lower.
Crude Oil (October)
Yesterday’s close: Settled at 86.61, down 2.94.
The levels work, key resistance at 90.06-90.54 slowed buying on the OPEC+ news, and gasp for air early this morning stalled at 89.55.
We took a Neutral Bias upon a break below $93 and maintain such.
Major three-star support floor at 86.16-86.28 has been reaffirmed upon multiple tests but we cannot ignore the weakening of its strength upon such multiple tests and fear a potential washout below brewing.
Gold (December) / Silver (December)
Gold, yesterday’s close: Settled at 1722.6, up 13.3 on Friday and down 27.2 on the week.
Silver, yesterday’s close: Settled at 17.881, up 0.215 on Friday and down 0.944 on the week.
A burst of strength overnight has been met with currency headwinds, a strengthening US Dollar.
Price action did exceed the first layers of major three-star resistance but has since slipped below; these levels will remain crucial as the session unfolds.
Learn more about Bill Baruch at Blue Line Futures.
