Price of Gold Fundamental Daily Forecast – Fear of Super-Sized Fed Rate Hike Capping Gains

Gold futures are edging lower early Monday despite a dip in Treasury yields and a slightly weaker U.S. Dollar. The price action suggests traders are still assessing the impact of Friday’s robust jobs report on Fed policy, and general uncertainty ahead of Wednesday’s U.S. consumer inflation report (CPI).

At 06:10 GMT, December Comex gold futures are trading $1789.50, down $1.70 or 0.09%. On Friday, the SPDR Gold Shares ETF (GLD) settled at $165.29, down $1.88 or -1.13%.

Friday Recap

Gold prices were pressured on Friday after a strong U.S. Non-Farm Payrolls report for July raised the prospect of aggressive rate hikes by the U.S. Federal Reserve when policymakers meet in late September.

The surprise jump in all parts of the NFP report including – Employment Change, Unemployment Rate and Average Hourly Earnings – pushed back recession talk, while driving the benchmark 10-year Treasury yield to nearly its highest level in two weeks. The jump in yields also drove the U.S. Dollar Index to its highest level since July 28.

Rising yields tend to weigh on demand for non-yielding bullion, while a stronger greenback tends to dampen foreign demand for the asset.

Fed Official Calls for More Aggressive Rate Hikes to Fight Inflation

Helping to keep a lid on gold prices early Monday are hawkish comments from a Fed official over the weekend. On Saturday, Fed Governor Michelle Bowman said the U.S. Federal Reserve should consider more 75 basis-point interest rate hikes at coming meetings in order to bring high inflation back down to the central bank’s 2% mandate.

“I supported the FOMC’s decision last week to raise the federal funds rate another 75 basis points,” Bowman said in prepared remarks to a Kansas Bankers Association event in Colorado, referring to the Federal Open Market Committee that sets monetary policy. “My view is that similarly-sized increases should be on the table until we see inflation declining in a consistent, meaningful, and lasting way.”

Daily Forecast

The Fed’s Bowman was not the only FOMC member calling for aggressive rate hikes. Last week, a trio of FOMC members made similar comments that cast doubts on the Fed shifting from hawkish to dovish at its next meeting in late September.

Furthermore, Friday’s jobs report also torpedoed worries over a recession, despite other reports that suggested the U.S. economy was headed in that direction.

Gold is going to have a hard time mounting a serious rally due to both potentially bearish developments.

A shift in expectations of a 50 basis-point rate hike in September to a 75 basis-point rate hike is also potentially bearish. According to the latest FedWatch data, traders currently see a 73.5% probability the Fed continues the pace of 75 basis point rate hikes for its next policy decision on September 21 to tame soaring inflation.

This figure is likely to be impacted by Wednesday’s U.S. consumer inflation report. It is expected to show inflation hasn’t peaked yet.

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Fundamental Daily Forecast – Supported by China Export Jump, Russian Crude Price Recovery

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are inching higher on Monday while trading inside Friday’s range. The price action suggests investor indecision and impending volatility. Traders haven’t confirmed the previous session’s technical closing price reversal bottom either, another sign of cautiousness among traders.

At 05:23 GMT, September WTI crude oil is trading $89.27, up $0.26 or +0.29% and December Brent crude oil is at $92.37, up $0.45 or +0.49%. On Friday, the United States Oil Fund ETF (USO) settled at $71.53, unchanged.

Friday’s Recap

Friday was volatile session with the markets trading sharply lower shortly before the release of a U.S. Non-Farm Payrolls report on the notion that that the Fed’s rate hikes would cause a recession and drive down demand.

Prices reversed course to close higher on Friday, however, after stronger-than-expected jobs data indicated the economy would avoid recession, and allow the Fed to raise rates more aggressively.

Both markets were down for the week with front-month Brent prices hitting their lowest levels since February, tumbling 13.7% and posting their largest weekly drop since April 2020. Meanwhile, nearby WTI lost 9.7%, as concerns over rising U.S. supply had traders questioning demand.

Faster China Export Growth Surprises Traders

Improving investor appetite for risk is helping to underpin prices early Monday as solid Chinese export data eased recession concerns.

China’s export growth unexpectedly picked up speed in July, offering an encouraging boost to the economy as it struggles to recover from a COVID-induced slump, but weakening global demand could start to drag on shipments in coming months.

Exports rose 18.0% in July from a year earlier, the fastest pace this year, official customs data showed on Sunday, compared with a 17.9% increase in June and beating analysts’ expectations for a 15.0% gain.

Daily Forecast

Although prices are getting some support from China’s export news, one should take it with a grain of salt because it may not have been a true reflection of the domestic economy. This is because crude oil imports in July fell 9.5% from a year earlier as fuel demand recovered more slowly than expected due to fresh virus outbreaks.

Also expected to weigh on prices over the near-term are worries over U.S. gasoline demand and China’s zero-COVID strategy. Both encouraged ANZ to revise down its oil demand forecasts for 2022 and 2023 by 300,000 bpd and 500,000 bpd, respectively. Oil demand for 2022 is also expected to come in a little below pre-pandemic highs.

There is some bullish news, but probably not enough to change the daily trend to up. Reuters is reporting that spot prices for Russia’s key export crude grade ESPO Blend to Asia have rebounded from all-time lows amid strong demand from top buyers India and China and easing concerns about possible sanctions.

With some traders locked onto worries about Fed rate hikes, we could see limited price action until Wednesday with the release of a U.S. consumer inflation report.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Fundamental Daily Forecast – Tight Trading Range as Traders Prepare for US Consumer Inflation Data

The Dollar/Yen is inching higher early Monday despite slightly lower U.S. Treasury yields. The market is showing little follow-through following the previous session’s surge that was fueled by a sharp rise in the 10-year U.S. Treasury yield on the back of a stronger-than-expected jobs report for July.

Nonetheless, traders aren’t reading much into the price action with expectations of a 75 basis point rate hike by the Fed at its September 21 meeting currently at 72.5%. Furthermore, most of the major players could be sitting on the sidelines ahead of Wednesday’s major U.S. Consumer Price Index report.

At 02:17 GMT, the USD/JPY is trading 135.322, up 0.279 or +0.21%. On Friday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $69.27, down $1.14 or +1.62%.

Friday Recap

The USD/JPY soared on Friday, following a huge jump in Treasury yields after the U.S. government released a jobs report that blew away the forecasts on all levels.

The data showed the economy added 528,000 new jobs last month, surpassing Dow Jones’ expectations of 258,000. The Unemployment Rate surprising dropped from 3.6% to 3.5%, or below pre-pandemic levels. Most importantly, wage growth rose with Average Hourly Earnings climbing 0.5% for the month and 5.2% over last year.

The news helped widen the spread between U.S. Government bond yields and Japanese Government bond yields, making the U.S. Dollar a more attractive investment than the Japanese Yen.

Japan Bank Lending Picks Up to Meet Rising Material Costs

Japanese bank lending rose 1.8% in July from year earlier, accelerating from the previous month, as some companies borrowed more to meet rising raw material costs amid a surge in global commodity inflation.

The data is among factors closely watched by the Bank of Japan (BOJ) in deciding whether to end a pandemic-relief loan scheme, aimed at easing a credit crunch among small firms, as scheduled when it expires in September.

Japan’s Jan – June Current Account Surplus Shrinks to 3.51 Trillion Yen

Japan’s current account surplus shrank 63.1 percent in the first half of 2022 from a year earlier to 3.51 trillion yen ($25.9 billion), the Finance Ministry said Monday.

Among key components, the country had a goods trade deficit of 5.67 trillion yen and a service trade deficit of 2.50 trillion yen, according to the ministry’s preliminary report.

In June alone, the country logged a current account deficit of 132.4 billion yen, dipping into the red for the first time in five months.

Daily Forecast

Traders are awaiting the release of Japan’s Economy Watchers Sentiment report at 05:00 GMT. It is expected to come in at 51.6, down from the previously reported 52.9. Last month, Japan’s service sector sentiment index posted its first decline in four months in June, a sign of deteriorating sentiment regarding the overall economy.

There are no U.S. reports on Monday. Nonetheless, most of the major players are expected to remain on the sidelines until Wednesday’s U.S. Consumer Price Index (CPI) report and Core CPI data.

U.S. CPI is expected to have risen by 0.2%, which would be down from the previous month’s 1.3%. Core CPI is expected to have increased by 0.5%, which is only slightly lower than the previously reported 0.7% jump.

The figures suggest U.S. inflation may have peaked, especially with gasoline prices falling during July. However, this doesn’t mean the Fed is going to lighten up on its quest to drive consumer inflation down to its mandated 2.0%.

With 44 days to go before the Fed’s rate decision on September 21, traders are pricing in a 72.5% chance of a 75 basis point rate hike by policymakers. Since the Fed is expected to be aggressive with its next rate hike and the Bank of Japan (BOJ) is expected to maintain its ultra-dovish stance, the U.S. Dollar will continue to be the most favored currency.

The price action suggests traders are still reacting to Friday’s jobs report. In order to sustain the rally, Wednesday’s U.S. consumer inflation report is going to have to come in bullish or the USD/JPY could become rangebound.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD and NZD/USD Fundamental Daily Forecast – Limited Movement on Positioning Ahead of US CPI Report

The Australian and New Zealand Dollars are trading slightly lower early Monday as investors continue to assess the impact of Friday’s powerfully strong U.S. Non-Farm Payrolls report on Fed policy. The stunning U.S. payrolls report pushed back against talk of recession but also bolstered the case for more super-sized rate hikes.

Traders are also being cautious as they braced for a U.S. Inflation report later this week that could force another 75 basis-point rate hike. Meanwhile, some investors are monitoring U.S./China relations, which could escalate and lead to heightened volatility for riskier assets.

At 01:13 GMT, the AUD/USD is trading .6910, down 0.0003 or -0.04% and the NZD/USD is at .6236, down 0.0007 or -0.12%. On Friday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $68.45, down $0.59 or -0.85%.

Friday Recap

The Aussie and the Kiwi closed sharply lower against the U.S. Dollar on Friday and for the week, with most of the selling pressure fueled by Friday’s stronger-than-expected U.S. labor market report.

The report showed employment in the U.S. jumped by much more than expected in the month of July, leading to calls for an aggressive move by the Fed at its September 21 policy meeting.

Not only did the number of new jobs come in more than twice that expected, but the unemployment rate fell to pre-pandemic lows. Average Hourly Wages also rose sharply, which indicates inflation is still running high, and may be the key reason why the Fed is strongly expected to attack inflation aggressively at its next meeting.

Domestic Reports in Focus

There are no major reports out of Australia and New Zealand this week, but traders will still get the opportunity to react to economic surveys including Westpac Consumer Sentiment, NAB Business Confidence in Australia, and the BusinessNZ Manufacturing Index in New Zealand.

Daily Forecast

The schedule is a little light late Sunday/early Monday with trader given the opportunity to react to a report on New Zealand Inflation Expectations. Last month, inflation expectations increased slightly from 3.27% to 3.29%.

There are no U.S. reports on Monday. Nonetheless, most of the major players are expected to remain on the sidelines until Wednesday’s U.S. Consumer Price Index (CPI) report and Core CPI data.

U.S. CPI is expected to have risen by 0.2%, which would be down from the previous month’s 1.3%. Core CPI is expected to have increased by 0.5%, which is only slightly lower than the previously reported 0.7% jump.

The figures suggest U.S. inflation may have peaked, especially with gasoline prices falling during July. However, this doesn’t mean the Fed is going to lighten up on its quest to drive consumer inflation down to its mandated 2.0%.

With 44 days to go before the Fed’s rate decision on September 21, traders are pricing in a 72.5% chance of a 75 basis point rate hike by policymakers. Since the Fed is expected to raise rates at a faster pace than the Reserve Bank of Australia (RBA), the AUD/USD could weaken further. At a minimum, gains are likely to be capped.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Forex Technical Analysis – Trader Reaction to 134.901 – 135.960 Determines Near-Term Direction

The Dollar/Yen soared on Friday in wake of much stronger-than-predicted U.S. jobs market data for July that eased concerns about the U.S. economy being in recession, while simultaneously intensifying worries that inflation may persist at elevated levels.

According to a U.S. government report, the economy added 528,000 jobs in July, far more than the 250,000 forecast by economists, while the pace of Average Hourly Earnings growth accelerated to 0.5 month-over-month and 5.2% year-over-year from 0.4% and 5.1% in June.

On Friday, the USD/JPY settled at 135.043, up 1.808 or +1.36%. The Invesco CurrencyShares Japanese Yen Trust ETF (FXY) finished at $69.27, down $1.14 or -1.62%.

The solid jobs report strongly supports the case for further aggressive rate hikes from the U.S. Federal Reserve, with financial market traders already pricing in a more than 60% chance of a 75 bps rate hike at the central bank’s next meeting in September from around 40% shortly before the release of the report.

More importantly for Dollar/Yen traders, the data sent U.S. government bond yields sharply higher across the yield curve, making the U.S. Dollar a more attractive asset than the Japanese Yen.

Another way to look at it, the U.S. Federal Reserve is hawkish and likely to raise rates aggressively, while the Bank of Japan remain dovish and likely to keep 10-year Japanese government bond yields looked close to zero.

Daily USD/JPY

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum has been trending higher since the confirmation of the closing price reversal bottom on August 2.

A trade through 139.389 will change the main trend to up. A move through 130.412 will negate the closing price reversal bottom and signal a resumption of the downtrend.

The main range is 126.362 to 139.389. Its retracement zone at 132.876 to 131.338 is support.

The short-term range is 139.389 to 130.412. Its retracement zone at 134.901 to 135.960 is potential resistance. It was tested on Friday.

Short-Term Outlook

Trader reaction to the retracement zone at 134.901 to 135.960 is likely to determine the short-term direction of the USD/JPY.

A sustained move over 134.901 will be a sign of strength early Monday with 135.960 the first target. Overtaking this level could trigger an acceleration to the upside.

A sustained move under 134.901 will signal the presence of sellers. They will be trying to form a potentially bearish secondary lower top. If this move gains traction then look for a move into the minor pivot at 132.953. If this level fails then look for the selling to possibly extend into the main retracement zone at 132.876 to 131.338.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Forex Technical Analysis – Rising Fed Rate Hike Expectations Could Drive Euro Below Parity

The Euro closed lower against the U.S. Dollar on Friday after stronger-than-expected U.S. jobs data fueled expectations for a 75 basis point rate hike at the Federal Reserve’s September 21 meeting.

The U.S. Non-Farm Payrolls increased by 528,000 jobs last month, the Labor Department said in its employment report on Friday. The figure surpassed expectations of 258,000. Data for June was revised higher to show 398,000 jobs created instead of the previously reported 372,000.

At the same time, wage growth rose with average earnings climbing 0.5% for the month and 5.2% over last year. The unemployment rate fell to a pre-pandemic low of 3.5%. The stronger than anticipated report showed that the U.S. is likely not in a recession.

On Friday, the EUR/USD settled at 1.0179, down 0.0048 or -0.47%. The Invesco CurrencyShares Euro Trust ETF (FXE) finished at $94.02, down $0.65 or -0.69%.

The EUR/USD could weaken next week if traders continue to bet the U.S. Federal Reserve rate hikes will outpace those from the European Central Bank (ECB).

Daily EURUSD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since August 2, following the confirmation of the closing price reversal top.

A trade through 1.0294 will reaffirm the uptrend. A trade through 1.0097 will change the main trend to down.

The minor trend is up. A trade through 1.0123 will change the minor trend to down. This will confirm the shift in momentum.

The intermediate range is 1.0615 to .9952. Its 50% level at 1.0284 is resistance. This is followed by additional retracement zone resistance at 1.0363 to 1.0460.

The minor range is 1.0097 to 1.0294. Its 50% level or pivot comes in at 1.0196.

The short-term range is .9952 to 1.0294. Its retracement zone at 1.0123 to 1.0083 is the next downside target.

Short-Term Outlook

Trader reaction to the pivot at 1.0196 is likely to determine the direction of the EUR/USD early Monday.

Bearish Scenario

A sustained move under 1.0196 will indicate the presence of sellers. If this creates enough downside momentum then look for a move into 1.0123 to 1.0083.

Since the main trend is up, buyers could come in on the first test of 1.0123 to 1.0083. Taking out 1.0083, however, could trigger an acceleration to the downside.

Bullish Scenario

A sustained move over 1.0196 will indicate the presence of buyers. If this generates enough upside momentum then look for the rally to possibly extend into the resistance cluster at 1.0284 – 1.0294.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD Forex Technical Analysis – Trader Reaction to .6864 – .6821 Retracement Zone Sets Near-Term Tone

The Australian Dollar finished lower on Friday after a stronger-than-expected U.S. labor market report drove up the odds of an additional 75 basis point rate hike in September.

The report showed employment in the U.S. jumped by much more than expected in July, leading to concerns about the outlook for interest rates. U.S. Non-Farm payrolls spiked by 528,000 jobs in July after surging by an upwardly revised 398,000 jobs in July. Economists had expected employment to climb by about 250,000 jobs compared to the addition of 372,000 jobs originally reported for the previous month.

On Friday, the AUD/USD settled at .6912, down 0.0080 or -1.15%. The Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $68.45, down $0.59 or -0.85%.

With the stronger than expected job growth, the unemployment rate unexpectedly edged down to 3.5 percent in July from June’s 3.6 percent reading. The unemployment rate was expected to come in unchanged. Average hourly earnings rose 0.5% for the month and the previous month was revised higher to 0.4%. Traders were looking for a reading of 0.3%.

The stronger-than-expected jobs report likely means the Fed will raise rates by another 75 basis points while the Reserve Bank of Australia (RBA) is expected to boost rates by only 50 basis points. This makes the U.S. Dollar the more attractive currency.

Daily AUD/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower. A trade through .7047 will reaffirm the uptrend. A move through .6682 will change the main trend to down.

The minor trend is down. This is controlling the momentum. A trade through the minor bottom at .6859 will indicate the selling pressure is getting stronger. A move through .6990 will change the minor trend to up.

The intermediate range is .7283 to .6682. Its retracement zone at .6983 to .7053 is resistance. This zone stopped the rally at .7047 on August 1.

The minor range is .6859 to .7047. The AUD/USD closed under its pivot at .6953, making it potential resistance.

The short-term range is .6682 to .7047. Its retracement zone at .6864 to .6821 is the primary downside target.

Short-Term Outlook

Trader reaction to the retracement zone at .6864 to .6821 is likely to determine the short-term direction of the AUD/USD.

Since the main trend is up, buyers are likely to come in on the first test of .6864 to .6821. They are going to try to form a potentially bullish secondary higher bottom.

A sustained move under the Fibonacci level at .6821 will indicate the selling pressure is getting stronger. If this creates enough downside momentum then look for the selling to possibly extend into the main bottom at .6682.

For a look at all of today’s economic events, check out our economic calendar.

Gold Price Futures (GC) Technical Analysis – Struggling to Overcome $1798.50 – $1822.60 Retracement Zone

Gold futures are trading lower shortly after the mid-session on Friday as a surprisingly strong U.S. labor market report eased recession worries and torpedoed speculation that the Federal Reserve would pivot away from its aggressive monetary policy tightening.

At 18:05 GMT, December Comex gold is trading $1791.80, down $15.10 or -0.84%. The SPDR Gold Shares ETF (GLD) is at $165.29, down $1.88 or -1.13%.

The government’s job data showed Non-Farm Payrolls increased 528,000 last month and surpassed Dow Jones’ expectations of 258,000. At the same time, wage growth rose with average earnings climbing 0.5% for the month and 5.2% over last year. The unemployment rate fell to a pre-pandemic low of 3.5%. The stronger than anticipated report showed that the U.S. is likely not in a recession.

For a little over a week, gold traders were pricing in a shift by the Fed from hawkish to somewhat dovish on the notion that the U.S. economy was weakening. Today’s report shows the economy is strong enough to handle another 75 basis point rate hike by the Fed at its next meeting on September 21.

This may be enough to cap gold prices, at least temporarily, but some traders may be waiting for confirmation from Wednesday’s U.S. consumer inflation report.

Daily December Comex Gold

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $1812.00 will signal a resumption of the uptrend. A move through $1727.00 will change the main trend to down.

The minor trend is also up. A trade through $1770.00 will change the minor trend to down. This will shift momentum to the downside.

The intermediate range is $1900.80 to $1696.10. Its retracement zone at $1798.50 to $1822.60 is resistance. It stopped the rally on Thursday at $1812.00.

The first minor range is $1770.00 to $1812.00. Its pivot at $1791.00 is the first downside target.

The second minor range is $1727.00 to $1812.00. Its pivot at $1769.50 is the next downside target. A third pivot price target comes in at $1754.10.

Short-Term Outlook

The direction of the December Comex gold futures contract into the close on Friday is likely to be determined by trader reaction to a pair of 50% levels at $1798.50 and $1791.00.

Look for the upside bias to continue on a sustained move over $1798.50, and for a downside bias to develop on a sustained move under $1791.00.

For a look at all of today’s economic events, check out our economic calendar.

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – In Position to Post Closing Price Reversal Top

September E-mini NASDAQ-100 Index futures are trading lower late in the session on Friday, pressured by Tesla and other technology-related stocks after an unexpectedly strong jobs U.S. jobs report shattered recent optimism that the Federal Reserve might ease its aggressive campaign to reign in decades-high inflation.

At 18:05 GMT, September E-mini NASDAQ-100 Index futures are at 13191.00, down 137.00 or -1.03%. The Invesco QQQ Trust ETF (QQQ) is trading $321.79, down $2.61 or -0.81%.

A fresh jobs report showed U.S. employers hired far more workers than expected in July, the 19th straight month of payrolls expansion, with the unemployment rate falling to a pre-pandemic low of 3.5%.

In stock related news, Tesla tumbled 6.6% and weighed heavily on the NASDAQ Composite. Facebook-owner Meta Platforms lost 2% and Amazon fell 1.2%, also pulling down the index.

Daily September E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the intraday high at 13384.50 will signal a resumption of the uptrend. A move through the nearest main top at 13582.75 will reaffirm the uptrend.

The minor trend is also up. A trade through 12814.75 will change the minor trend to down. This will also shift momentum to the downside.

The intermediate range is 14327.50 to 11068.50. The index is trading on the strong side of its retracement zone at 13082.50 to 12698.00, making it support.

The nearest resistance is a longer-term retracement zone at 13812.00 to 14459.50.

Short-Term Outlook

Trader reaction to 13327.00 will determine the direction of the September E-mini NASDAQ-100 Index into the close on Friday.

Bearish Scenario

A sustained move under 13327.00 will indicate the presence of sellers. If this move creates enough downside momentum then look for a test of the intermediate Fibonacci level at 13082.50. A trade through this level will put the index in a weak position with the intermediate 50% level at 12698.00 the next key target.

Bullish Scenario

A sustained move over 13327.00 will signal the return of buyers. This could generate the upside momentum needed to challenge the intraday high at 13384.50. Taking out this level will indicate the buying is getting stronger with 13582.75 the next target.

Side Notes

A close under 13327.00 will form a potentially bearish closing price reversal top. If confirmed, this could trigger the start of a 2 to 3 day correction.

E-mini S&P 500 Index (ES) Futures Technical Analysis – Late Strength Over 4169.25, Weakness Under 4126.75

September E-mini S&P 500 Index futures are edging lower shortly before the mid-session on Friday as investors digest today’s robust U.S. employment report. Treasury yields rose, dampening demand for equities as the number of new jobs added to the economy blew past forecasts, increasing the odds of continued monetary tightening from the Federal Reserve.

At 18:05 GMT, September E-mini S&P 500 Index futures are trading 4136.50, down 15.75 or -0.38%. The S&P 500 Trust ETF (SPY) is at $412.45, down $1.72 or -0.41%.

The Labor Department’s employment report showed the U.S. economy added 528,000 jobs in July, more than double the 258,000 expected, while wage inflation remained hot and the participation rate edged lower.

The strong-than-expected payrolls data appeared to confirm the economy is not yet in recession. That drove up the odds of further rate increases at the Fed’s next meeting in September.

The big winner today is Constellation Energy Corp, up 8.55%. The big loser is Warner Bros Discovery, down 16.59%.

Daily September E-mini S&P 500 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower, following the confirmation of Thursday’s closing price reversal top.

A trade through 4173.25 will signal a resumption of the uptrend. A move through 3723.75 will change the main trend to down.

The minor trend is also up. A trade through 4080.50 will change the minor trend to down. This will confirm the shift in momentum.

On the upside, the nearest resistance is a 50% level at 4169.25. This is followed by another 50% level at 4250.25.

The first minor range is 4080.50 to 4173.25. The market is currently straddling its pivot at 4126.75. The second minor range is 3913.25 to 4173.25. If the minor trend changes to down then look for a test of its pivot at 4043.25.

Daily Swing Chart Technical Forecast

Trader reaction to the pivot at 4126.75 is likely to determine the direction of the September E-mini S&P 500 Index into the close on Friday.

Bullish Scenario

A sustained move over 4127.00 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into the resistance cluster at 4169.25 to 4173.25.

Bearish Scenario

A sustained move under 4126.75 will signal the presence of sellers. If this generates enough downside momentum then look for the selling to continue into the minor bottom at 4080.50.

If 4080.50 fails as support then look for the selling to possibly extend into the pivot at 4043.25.

For a look at all of today’s economic events, check out our economic calendar.

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Stronger Over 32522, Weaker Under 32302

September E-mini Dow Jones Industrial Average futures are trading flat late in the session on Friday after recovering from a steep loss shortly after the release of stronger-than-expected U.S. Non-Farm Payrolls data.

The report is causing a little confusion for investors because it shows the economy is strong and not likely in a recession, which tends to be good for stocks. But it also likely means the Fed could go big with another 75 basis point rate hike at its September 21 meeting. Rising interest rates tend to weigh on stocks.

At 18:05 GMT, September E-mini Dow Jones Industrial Average futures are trading 32682, up 1 or +0.00%. This is up from an intraday low of 32431.

The labor market added 528,000 jobs in July, easily beating a Dow Jones estimate of a 258,000 increase. The Unemployment Rate ticked down to 3.5%, below the 3.6% estimate. Wage growth also rose more than estimated, up 0.5% for the month and 5.2% higher than a year ago, signaling that high inflation is likely still a problem.

In stock related news, JPMorgan Chase & Co is the biggest gainer, up 3.20%. This is followed by Chevron Corp, up 2.14% and Goldman Sachs Group is up 0.95%. Walt Disney is the biggest loser, down 1.40%.

Daily September E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 32938 will signal a resumption of the uptrend. A move through 30109 will change the main trend to down.

The minor trend I also up. A trade through 32342 will change the minor trend to down. This will also shift momentum to the downside.

The main range is 35405 to 29639. The market is currently testing its retracement zone at 32522 to 33202. Additional support is a minor pivot at 32302.

Daily Swing Chart Technical Forecast

Trader reaction to the main 50% level at 32522 is likely to determine the direction of the September E-mini Dow into the close on Friday.

Bullish Scenario

A sustained move over 32522 will signal the presence of buyers. If this move creates enough upside momentum then look for a late session move into the main top at 32938. Taking out this level could trigger a surge into the main top at 33255, followed by the main Fibonacci level at 33202.

Bearish Scenario

A sustained move under 32522 will indicate the presence of sellers. The first target is the minor bottom at 32342, followed by a minor pivot at 32302. This price is a potential trigger point for an acceleration to the downside.

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Price Update – Rate Hike Worries Shaking Out Longs

U.S. West Texas Intermediate crude oil futures are trading flat on Friday shortly after the release of a strong U.S. Non-Farm Payrolls report that suggests the U.S. is not in a recession and that the Fed is likely to continue on its aggressive rate hiking path.

Prices have come under pressure this week as the traders have fretted over the impact of inflation on economic growth and demand, but tight supply has kept a floor under prices.

At 12:45 GMT, September WTI crude oil futures are trading $88.56, up $0.02 or +0.02%. On Thursday, the United States Oil Fund ETF (USO) settled at $71.53, down $2.00 or -2.72%.

The price action throughout the week has been indicating that traders are taking the threat of recession far more seriously – meaning demand will take a hit, but today’s U.S. jobs report suggests the economy may not be headed that way. Furthermore, it could mean investors will shift their attention back to a market that is facing tight supply and producers with no capacity to change that.

Daily September WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through Thursday’s low at $87.55 will signal a resumption of the downtrend. A move through $101.88 will change the main trend to up. This is unlikely but since the market is testing a major support zone, it may be ripe for a closing price reversal bottom.

The market is currently testing a major 50% to 61.8% retracement zone at $89.54 to $82.80. This zone stopped the selling in mid-July at $88.23.

Daily Swing Chart Technical Forecast

Trader reaction to the long-term 50% level at $89.54 is likely to determine the direction of the September WTI crude oil market into the close on Friday.

Bearish Scenario

A sustained move under $89.54 will indicate the presence of sellers. If this continues to generate enough downside momentum then look for the selling to possibly extend into the major Fibonacci level at $82.80.

Bullish Scenario

A sustained move over $89.54 will signal the presence of buyers. If this generates enough upside momentum then look for a possible surge into a minor pivot at $94.72.

Side Notes

A close over $88.54 will form a minor closing price reversal bottom. If confirmed, this could trigger the start of a short-term counter-trend rally.

For a look at all of today’s economic events, check out our economic calendar.

Gold Price Futures (GC) Technical Analysis –Weakens Under $1798.50, Strengthens Over $1822.60

Gold futures are modestly lower early Friday as traders awaited for Friday’s jobs report for further clues about the Federal Reserve’s path of rate hikes and the state of the economy.

Economists expect 258,000 jobs were added in July, down from 372,000 in June according to Dow Jones. Unemployment is expected to hold steady at 3.6% and Average Hourly Earnings are expected to have risen 0.3%.

At 08:17 GMT, December Comex gold futures are trading $1803.20, down $3.70 or -0.20%. On Thursday, the SPDR Gold Shares ETF (GLD) settled at $167.15, up $2.70 or +1.64%.

Traders are hoping the U.S. Non-Farm Payrolls report offers more clarity on the Federal Reserve’s aggressive tightening plans to fight inflation.

A strong report, especially the average hourly earnings figure, could give the Fed the greenlight to raise rates 50 to 75 basis points at its next policy meeting on September 21. This would likely give Treasury yields and the U.S. Dollar a lift, while driving down gold prices. A weaker-than-expected NFP report could spike gold prices higher since it would reduce the chances of additional aggressive rate hikes.

Daily December Comex Gold

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through Thursday’s high at $1812.00 will indicate the buying is getting stronger. A trade through $1727.00 will change the main trend to down. Additionally, due to the prolonged move up in terms of price and time, the market is vulnerable to a closing price reversal top.

The minor trend is also up. A trade through $1770.00 will change the main trend to down. This will also shift momentum to the downside.

The intermediate range is $1900.80 to $1696.10. The market is currently testing its retracement zone at $1798.50 to $1822.60. This area is controlling the near-term direction of the market.

The minor range is $1727.00 to $1812.00. Its 50% level at $1769.50 forms a support cluster with the minor bottom at $1770.00.

Another minor range is $1696.10 to $1812.00. Its 50% level at $1754.10 is additional support.

Daily Swing Chart Technical Forecast

Trader reaction to $1806.90 is likely to determine the direction of the December Comex gold futures contract on Friday.

Bullish Scenario

A sustained move over $1806.90 will indicate the presence of buyers. Taking out yesterday’s high at $1812.00 could lead to a test of the intermediate Fibonacci level at $1822.60.

The Fib level at $1822.60 is a potential trigger point for an acceleration to the upside with a pair of main tops at $1880.00 and $1900.80 the next targets.

Bearish Scenario

A sustained move under $1806.90 will signal the presence of sellers. The first target is the intermediate 50% level at $1798.50. This is a potential trigger point for an acceleration to the downside with a pair of 50% levels at $1769.50 and $1754.10 the next targets.

For a look at all of today’s economic events, check out our economic calendar.

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Bullish NFP Report Will Put 13582.75 on Radar

September E-mini NASDAQ-100 Index futures are inching higher early Friday as investors positioned themselves ahead of the U.S. Non-Farm Payrolls report, due to be released at 12:30 GMT.

The jobs report will provide hints of how the U.S. economy is faring which could give investors further clues about the Federal Reserve’s path of rate hikes.

Economists expect 258,000 jobs were added in July, down from 372,000 in June, according to Dow Jones. Unemployment is expected to hold steady at 3.6% and Average Hourly Wages are expected to have risen by 0.3%.

At 05:35 GMT, September E-mini NASDAQ-100 Index futures are trading 13363.00, up 36.00 or +0.27%. On Thursday, the Invesco QQQ Trust ETF (QQQ) settled at $324.32, up $1.43 or +0.44%.

Thursday Recap – Signs of Softening Labor Market

In a sign of a softening in the labor market, data on Thursday showed that the number of Americans filing new claims for unemployment benefits increased last week.

Weekly Initial Jobless Claims rose to 260,000 for the week-ended July 30, in line with estimates from Dow Jones.

In stock related news, volume and volatility were extremely light ahead of the jobs data, but the tech-heavy NASDAQ was still able to hit a fresh three-month high on the back of strong performances in Amazon and Advanced Micro Devices, up 2.19% and 5.93%, respectively.

Daily September E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. Taking out the nearest main top at 13582.75 will reaffirm the uptrend. A move through 12072.00 will change the main trend to down.

The minor trend is also up. A trade through 12814.75 will change the minor trend to down. This will also shift momentum to the downside.

The intermediate range is 14327.50 to 11068.50. The index is trading on the strong side of its retracement zone at 13082.50 to 12698.00, making it support.

The nearest major upside target is a long-term 50% level at 13812.00.

Daily Swing Chart Technical Forecast

Trader reaction to 13327.00 is likely to determine the direction of the September E-mini NASDAQ-100 Index on Friday.

Bullish Scenario

A sustained move over 13327.00 will indicate the presence of buyers. If this move creates enough upside momentum then look for a surge into the main top at 13582.75. Overtaking this level will indicate the buying is getting stronger with the 50% level at 13812.00 the next target.

Bearish Scenario

A sustained move under 13327.00 will signal the presence of sellers. This could trigger a break into the intermediate Fibonacci level at 13082.50. Look for an even steeper break into 12814.75 to 12698.00 if the Fib level fails as support.

Side Notes

A stronger-than-expected U.S. Non-Farm Payrolls report could be bearish for stocks because it is likely to greenlight another aggressive rate hike by the Fed in September. The Fed is likely to pay particularly close attention to Average Hourly Earnings since they represent inflation.

Strong Average Hourly Earnings could lead to wage spiral inflation, which is dangerous and something the Fed doesn’t want to see.

For a look at all of today’s economic events, check out our economic calendar.

E-mini S&P 500 Index (ES) Futures Technical Analysis – Treading Water Ahead of Friday’s NFP Report

September E-mini S&P 500 Index futures are trading flat shortly before the cash market close on Thursday as most of the major players took to the sidelines ahead of Friday’s U.S. jobs report, which will reveal the status of the labor market and the health of the economy after a pair of 75 basis point rate hikes by the Federal Reserve in June and July.

At 19:11 GMT, September E-mini S&P 500 Index futures are trading 4157.00, up 0.75 or +0.02%. The S&P 500 Trust ETF (SPY) is at $414.42, down $0.03 or -0.01%.

Investors will be watching the July jobs report very closely since the financial markets have priced in an equal chance of a 50 basis point rate hike and a 75 basis point rate hike at its September meeting.

The report is expected to show employers added about 250,000 jobs in July, down from 372,000 in June. The jobless rate is forecast to remain 3.6%, according to FactSet. Average Hourly Earnings, a key inflation indicator, are expected to rise 0.3%.

Daily September E-mini S&P 500 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the intraday high at 4173.25 will indicate the buying is getting stronger. The uptrend is safe with the nearest main bottom coming in at 3723.75.

The minor trend is also up. A trade through 4080.50 will change the minor trend to down. This will shift momentum to the downside.

The nearest resistance is a long-term 50% level at 4169.25. This level essentially stopped the rally at 4173.25 earlier today.

The nearest support is a minor pivot at 4126.75.

Short-Term Outlook

Trader reaction to 4156.25 is likely to determine the direction of the September E-mini S&P 500 Index into the close on Thursday.

A late session breakout over 4169.25 will signal the presence of buyers, while a move under 4126.75 will indicate that sellers are coming in stronger.

For a look at all of today’s economic events, check out our economic calendar.

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Lackluster Trade Ahead of NFP

September E-mini Dow Jones Industrial Average futures are trading slightly lower late in the session on Thursday in a lackluster trade as investors await the release of the latest U.S. Non-Farm Payrolls report on Friday.

The report could provide clues on the size and pace of future interest rate hikes by the Federal Reserve. Currently, traders are mixed about whether the Fed hikes 50 or 75 basis points at its September 21 monetary policy meeting.

At 19:11 GMT, September E-mini Dow Jones Industrial Average futures are trading 32706, down 64 or -0.20%. The SPDR Dow Jones Industrial Average ETF (DIA) is at $327.32, down $0.84 or -0.26%.

The closely watched U.S. employment report is due to be released on Friday at 12:30 GMT. Economists are predicting the economy added 250K new jobs in July. The unemployment rate is expected to hold steady at 3.6% and Average Hourly Earnings expected to gain 0.3%.

Any signs of strength in the labor market could feed fears of aggressive measures by the Fed. Of particular interest for the Fed will be Average Hourly Earnings since they represent a form of inflation.

There were more stocks down than up on Thursday. On the plus side, 3M Company is the biggest gainer, posting a 3.23% gain. Visa Inc jumped 2.39% and American Express advanced 0.93%. The losers include Walmart, which declined 3.78% and Chevron Corp., down 2.72%.

Daily September E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 32938 will reaffirm the uptrend.

The minor trend is also up. A trade through 32342 will change the minor trend to down. This will also shift momentum to the downside.

The E-mini Dow is currently trading inside a major long-term retracement zone at 32522 to 33202. This area is controlling the near-term direction of the market.

On the downside, the minor support is a pivot at 32302.

Short-Term Outlook

Trader reaction to a pair of 50% levels at 32522 and 32302 is likely to determine the near-term direction of the E-mini Dow.

Look for the upside bias to continue on a sustained move over 32522 and for a downside bias to develop on a sustained move under 32302.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Forex Technical Analysis – Reaction to 1.0196 Pivot Sets Tone into Close

The Euro is edging higher against the U.S. Dollar on Thursday as traders prepare for Friday’s U.S. Non-Farm Payrolls report that could offer clues as to the size of the Federal Reserve’s next interest rate hike at its September 21 policy meeting.

Ahead of the NFP report, the U.S. released its Weekly Unemployment Claims report earlier today. The report showed initial claims for unemployment insurance totaled 260,000 last week, near the highest level since November amid a shift in the U.S. labor market.

The total for the week ended July 30 was in line with the Dow Jones estimate but a gain of 6,000 from the previous week’s downwardly revised level, the Labor Department reported Thursday.

At 16:45 GMT, the EUR/USD is trading 1.0235, up 0.0066 or +0.65%. The Invesco Currency Shares Euro Trust ETF Trust ETF (FXE) settled at $94.44, up $0.47 or +0.50%.

The Euro isn’t really stronger today, but the U.S. Dollar is weaker. Traders said the greenback is being pressured as the positive impact of hawkish Federal Reserve comments from earlier in the week faded.

Instead, investors have chosen to wait for more signs on the data front to confirm that more rate hikes to curb inflation were coming. In other words, the movement in the U.S. Dollar until the Fed makes its interest rate decision on September 21 is going to be data dependent.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.0294 will reaffirm the uptrend. A move through 1.0097 will change the main trend to down.

The minor range is 1.0097 to 1.0294. The EUR/USD is currently trading on the strong side of its pivot at 1.0196, making it support.

On the downside, short-term support is the retracement zone at 1.0123 to 1.0083.

On the upside, the nearest resistance is a 50% level at 1.0284, followed by a retracement zone at 1.0363 to 1.0460.

Daily Swing Chart Technical Forecast

Trader reaction to the minor pivot at 1.0196 is likely to determine the direction of the EUR/USD into the close on Thursday.

Bullish Scenario

A sustained move over 1.0196 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into the resistance cluster at 1.0284 to 1.0294. Taking out 1.0294 will strong volume could trigger an acceleration into 1.0363.

Bearish Scenario

A sustained move under 1.0196 will signal the presence of sellers. If this creates enough downside momentum then look for the selling to extend into the support cluster at 1.0123, followed by a second support cluster at 1.0097 to 1.0083.

A trade through 1.0097 will change the main trend to down, but a move through 1.0083 will trigger an acceleration to the downside.

For a look at all of today’s economic events, check out our economic calendar.

Should We Be Prepared For An Aggressive U.S. Fed In The Future?

The US stock markets started an upward trend after the last 75bp rate increase – expecting the U.S. Fed to move toward a more data-driven rate adjustment.

My research suggests the U.S. Federal Reserve has a much more difficult battle ahead related to inflation, global market concerns, and underlying global monetary function. Simply put, global central banks have printed too much money over the past 7+ years, and the eventual unwinding of this excess capital may take aggressive controls to tame.

Real Estate Data Shows A Sudden Shift In Forward Expectations

The US housing market is one of the first things I look at in terms of consumer demand, home-building expectations, and overall confidence for consumers to engage in Big Ticket spending. Look at how the US Real Estate sector has changed over the past five years.

The data comparison chart below, originating from September 2017, shows how the US Real Estate sector went from moderately hot in late 2017 to early 2018; stalled from July 2018 to May 2019; then got super-heated in late 2019 as extremely low-interest rates drove buyers into a feeding frenzy.

As the COVID-19 virus initiated the US lockdowns in March/April 2020, you can see the buying frenzy ground to a halt. Between March 2020 and July 2020, Average Days On Market shot up from -8 to +17 (YoY) – showing people stopped buying homes. At this same time, home prices continued to rise, moving from +3.3% to +14% (YoY) by the end of 2020.

The buying frenzy then kicked back into full gear and continued at unimaginable levels throughout 2021 as interest rates stayed near lows and FOMO increased. Over the past 7+ years, the excess capital meant buyers could sell their existing homes, relocate to a cheaper area, avoid COVID risks, and reduce their mortgage costs with almost no risks. This “great relocation” event likely sparked the high inflation/CPI trends we are battling right now.

US Real Estate Conditions chart

(Source: Realtor)

Extreme Easy Monetary Policies May Prompt A Harsh U.S. Fed Action In The Future

Traders expect the U.S. Federal Reserve to softly pivot away from rate increases after reaching a “normal level.” I believe the U.S. Federal Reserve will have to continue aggressively raising rates to battle ongoing inflation and global concerns. I don’t believe traders have even considered what may be necessary to break this cycle – or are simply hoping they never see 14% FFR rates again (like we saw in the 1980s).

The harsh reality is the excess capital floating around the globe has anchored an inflationary trend that may be unstoppable without central banks taking interest rates to extremes. There was only one other period where I see similarities between what is taking place now and the recent past – 1970~2003.

Throughout that span of time, the U.S. Federal Reserve moved away from the Gold Standard and entered an extended period of money creation. This prompted a big increase in CPI and Inflation, leading to extreme FFR rates above 15% in 1982 to battle inflationary trends (see the charts below). CPI continued above 5% for another 15+ years after 1982 – finally bottoming in 2010.

What if the extended money printing that started after the 2007-08 Global Financial Crisis sparked another excess capital/inflation phase just like the 1970 to 2003 phase? What’s next?

Sticky Consumer Price Index Chart

Effective Federal Funds Rate Chart

M2 - Money Stocks chart

Excess Money Must Unwind Over Time To Prompt A New Growth Phase

My thinking is the 2000~2019 unwinding phase, prompted by the DOT COM bubble, 911 Attacks, and the eventual 2008-09 Global Financial Crisis, pushed the devaluation of assets/excess toward extreme lows. This prompted the U.S. Federal Reserve to adopt an extended easy money policy.

COVID-19 pushed those extremes beyond anyone’s expectations – driving asset prices and the stock market into a frenzy. As inflation trends seem unstoppable, the Fed may need to take aggressive actions to thwart the global destruction of capital, currencies, and economies and avoid a massive humanitarian crisis. Run-away inflation will harm billions of people who can’t afford to buy a slice of bread if it goes unchallenged.

The U.S. Federal Reserve may be forced to raise FFR rates above 6.5~10% very quickly to avoid rampant inflation’s destructive effects. And that means traders are mistakenly assuming the U.S. Federal Reserve will pivot to a softer stance.

Real Estate Will Be The Canary In The Mine If Fed Stays Aggressive

I believe Real Estate could see an aggressive unwinding in valuation and future expectations if the U.S. Fed continues to raise rates over the next 12+ months aggressively. Once mortgage rates reach 8% or higher, home buyers and traders are suddenly going to question, “where is this going?” and “where will it end?”.

The Fed may have to break a few things to battle inflation trends. This same thing happened in the early 1980s, and real asset growth didn’t start to accelerate until the last 1990s (amid the DOT COM Bubble).

Real Estate & Financials May Show The First Signs Of Stress

I believe IYR and XLF are excellent early warning ETFs for a sudden shift in consumer/economic activity related to future Fed rate decisions. Once the Fed moves away from expected rates/trends, the Real Estate and Financial sectors will begin to react to economic contractions and weakening consumer demand/defaults.

IYR - US Real Estate ETF Daily Chart

This potential trend is still very early in the longer-term cycle, but I believe traders are falsely focused on a possible U.S. Fed pivot, thinking the Fed will shift away from continued rate increases. I believe the U.S. Federal Reserve must raise rates above 5.5% FFR in order to start breaking inflationary trends. That means FFR rates need to rise 125% or more from current levels (250 bp+) – which may be higher.

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Natural Gas Price Fundamental Daily Forecast – EIA Injection Over 40 Bearish, Under 30 Bullish

Natural gas futures are edging higher on Thursday, putting the market in a position to breakout to the upside following a dramatic technical reversal bottom the previous session. Underpinning prices is the news that the Freeport LNG plant remains on track to return to service in early October. The catalyst for a possible surge in prices, however, could be today’s weekly government storage report or a bullish midday weather forecast.

At 11:28 GMT, September natural gas futures are trading $8.335, up $0.069 or +0.83%. On Wednesday, the United States Natural Gas Fund ETF (UNG) settled at $28.53, up $2.12 or +8.03%.

LNG Regulator to Allow Freeport to Resume Partial Operations in October

After trading under pressure most of the session on Wednesday, September natural gas futures mounted a strong recovery into the close after the second-largest U.S. liquefied natural gas (LNG) exporter on Wednesday said it reached an agreement with a federal regulator that will allow it to resume some operations at its Quintana, Texas, plant in October, according to Reuters.

Freeport LNG shut the plant, which supplies about 20% of the U.S. LNG exports, following an explosion and fire on June 8. Its closure helped to push up LNG prices in Europe and Asia, and dampening U.S. natural gas prices.

This is potentially bullish news because it means more gas will be used for LNG protection with less going into storage. The United States became the world’s top LNG exporter during the first half of 2022. But not matter how high global gas prices rise, the United States cannot export any more LNG because its plants were already operating at full capacity.

Energy Information Administration Weekly Storage Report

Freeport is just part of the news today. Another part is the weekly government storage report. This report from the EIA, due to be released at 14:30 GMT, could offer some insight that launches the next spike to the upside, or plunge into a value zone.

According to Bespoke Weather Services, weather-adjust power burns were looser last week compared with the current week. Based on this assessment, they are calling for a storage injection of 35 Bcf.

That would compare with a 16 BCF injection into inventories for the comparable week last year, according to EIA. The five-year average build is 33 Bcf.

Natural Gas Intelligence (NGI) wrote, “A Bloomberg survey of eight analysts produced a range of injection estimates from 19 Bcf to 35 Bcf, with a median of 26 Bcf. A Wall Street Journal poll of 12 analysts had a tighter range of projections that averaged a 29 Bcf increase in storage. Reuters polled 15 analysts, whose estimates were as high as 37 Bcf, with a median forecast of 29 Bcf.”

Daily September Natural Gas

Daily Forecast

An injection over 40 Bcf will likely be bearish for prices. This could drive the market into the first support zone at $7.372 to $6.888, followed by the long-term support zone at $6.557 to $5.839.

An injection under 30 will likely trigger a spike through minor resistance at $8.705. If this creates enough upside momentum then look for a possible surge into $9.419 to $9.598 over the short-run.

If the report fails to move the needle then traders will shift their focus on the weather reports that are coming in a little cooler for mid-month than previously expected. This is a potentially bearish development.

For a look at all of today’s economic events, check out our economic calendar.

Here Is How To Find The Market Bottom With This Breadth Thrust Indicator

The breadth thrust indicator using the percentage of stocks above the 50-Day average for the S&P 500 has been rising with strong momentum since the low in June 2022. This could be a meaningful momentum starter, marking the stock market bottom in 2009, 2010, 2011, 2016, 2018 and 2020.

Using Market Breadth Thrust To Anticipate the Market Bottom

To qualify as a significant breadth thrust, it needs to hit the deeply oversold level, which is below (or close to) 10 followed by a rise above the deeply overbought level, which is above 90.

As reflected in the market breadth, the deeply oversold level suggests a selling climax or a depressed market with an extreme bearish sentiment. The subsequent sharp rise in the market breadth to the overbought level suggests urgent buying from the institutions, and bullish divergence could show up from time to time.

As shown above, a market bottom was formed in March 2020, where the breadth thrust dipped below 10 and rose beyond 90. This strong momentum of the breadth thrust started the bull market despite the market sentiment was very bearish because of the pandemic.

In December 2018, S&P 500 had a strong selloff as a shakeout, breaking below the support level at 2500. Similarly, the market breadth dipped below the oversold level and rebounded to 90, marking the market bottom in 2018.

Currently, the breadth thrust is at 76 with impulsive momentum similar to 2019 and 2020. A test of the overbought level is essential for the current breadth thrust to qualify as the momentum starter to kick start the bull run.

S&P 500 Chart
S&P 500 Chart

During 2015-2016, S&P 500 formed a trading range between 1800-2100 as shown above. In July 2015 although the market breadth hit the oversold level, it failed to reach the overbought level at 90. Hence it did not qualify as momentum starter that would mark the bottom, and it was confirmed by a lower low test in 2016. However, the breadth thrust in 2016 went from 10 to 90, which marked the market bottom.

In July 2011, although the breadth thrust qualified the condition from oversold to overbought, the momentum was not as strong as in 2016. This was also reflected in S&P 500 as multiple tests of the swing low were observed. Nevertheless, the breadth thrust in 2011 did mark the market bottom.

S&P 500 Chart
S&P 500 Chart

The breadth thrust in 2010 was similar to 2011, which was not impulsive enough. However, it did qualify (from 10 to 90) as a momentum starter to mark the market bottom.

During the global financial crisis in 2008-2009, there were three instances where the market breadth dipped below 10 yet the subsequent move did not reach the overbought level at 90. These were the classical bear market rallies, which traders and investors should pay attention to.

In March 2009, the breadth thrust went from below 10 to above 90, which marked the market bottom.

The Context Between Market Breadth Thrust and S&P 500

Watch the video below to find out the details of using the breadth thrust indicator to mark the bottom of S&P 500 in the past 6 events in 2009, 2010, 2011, 2016, 2018 and 2020.

As the current breadth thrust is yet to reach the overbought level, the market bottom is yet to be confirmed. While the bullish setups are gaining momentum, S&P 500 is short-term overbought and testing the resistance zone between 4100-4200. It is prudent to pick the best quality setup with decent reward to risk among the outperforming stocks. Visit TradePrecise.com to get more stock market insights in email for free.