{"id":110938,"date":"2021-11-11T09:45:00","date_gmt":"2021-11-11T14:45:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/?p=110938"},"modified":"2023-03-01T09:45:49","modified_gmt":"2023-03-01T14:45:49","slug":"inflation-is-back-can-risk-assets-withstand-it","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/futures\/inflation-is-back-can-risk-assets-withstand-it\/","title":{"rendered":"Inflation is Back, Can Risk-Assets Withstand It?"},"content":{"rendered":"\n<h2 class=\"wp-block-heading\" id=\"h-e-mini-s-p-december-nq-december\">E-mini S&amp;P (December) \/ NQ (December)<\/h2>\n\n\n\n<p>S&amp;P, yesterday\u2019s close: Settled at 4642.00, down 36.25<\/p>\n\n\n\n<p>NQ, yesterday\u2019s close: Settled at 15,980.50, down 232.25<\/p>\n\n\n\n<p>Fundamentals: Global equity markets were very stable overnight despite the healthy pullback during U.S. hours. The NQ shed 1.4% and rates ripped higher on the heels of hotter than expected inflation data. Tech, especially non-profitable tech, is most vulnerable to rising rates. Headline CPI rose by 6.2% YoY versus an expected 5.8%, the largest surge since 1990. Core CPI, excluding food and energy, rose by 4.6% versus an expected 4.3%. The long-end of the Treasury curve was delayed in it is reaction, while yields on the front-end moved sharply higher immediately due to rate hike expectations; the curve flattened dramatically, exuding slower growth. Odds of a rate hike by June have now reached 66%, with the probability of two hikes jumping to 19%. There are signs that growth is slowing, bearing fears that if inflation proves to not be transitory and continues a rise at this pace, the Federal Reserve will have to tighten into a slowdown. Although these are real concerns, the Fed has shown no signal that it wants to tighten policy, moreover, we believe they are terrified of a Q4 2018 \u2018autopilot\u2019 moment. This idea can be appreciated after last week, they essentially announced a net-zero taper and data as of Fed Day November 3rd, shows the bank\u2019s balance sheet hitting new heights.<\/p>\n\n\n\n<p>Asia quickly stabilized the risk-landscape last night after Evergrande scrapped together an 11th hour bond payment, at the end of a 30-day grace period. Hong Kong\u2019s Hang Seng gained 1% and the Nikkei halted a four-day slide. There were also tailwinds from data early yesterday that showed New Loans in China rising more than expected at 826.2 billion Yuan versus 800 billion Yuan.<\/p>\n\n\n\n<p><a href=\"https:\/\/www.bluelinefutures.com\/\" target=\"_blank\" rel=\"noreferrer noopener\">Do not miss our daily Midday Market Minute.<\/a><\/p>\n\n\n\n<p>Traders want to keep a pulse on the developing Covid situation in Europe. New cases in Germany set a record yesterday and the count in the Netherlands has risen to the highest level in a year. Lockdowns and other measures could bring an added tailwind to the U.S. Dollar\u2019s rise.<\/p>\n\n\n\n<p>Technicals: Yesterday was as technical as it gets. Last week, U.S. benchmarks embarked on a fresh bull leg, and we said defining a floor is now more important than defining resistance. The S&amp;P pinged into the budding floor at 4650.75-4654.50, a level that aligned multiple indicators with the gap close on November 3rd. Price action tested into this level overnight and again on the CPI release but bounced firmly. After stalling at first key resistance at 4678-4680 in the S&amp;P and 16,240 in the NQ, weakness ensued that aligned with a fallout in the 30-year Bond price. This quickly shredded through the budding higher floor and, from higher, the failure below 4670 gave a clear sell signal for a swing down. The move tested perfectly into rare major four-star support at 4620, a level well solidified as a floor and one that we have pointed to as defining our outright Bullish Bias. Similarly, the NQ shredded its budding floor at 16,143-16,157 and tested perfectly into 15,957-16,000, a level that we have said helps define our Bullish Bias. Price action stabilized well overnight and we will look to our momentum indicators as a leading indicator to stability at &#8230;&nbsp;<a href=\"https:\/\/www.bluelinefutures.com\/free-trial\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>Click here to get our (FULL) daily reports emailed to you!<\/strong><\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Crude Oil (December)<\/h2>\n\n\n\n<p>Yesterday\u2019s close: Settled at 81.34, down 2.81<\/p>\n\n\n\n<p>Fundamentals: All eyes will be on OPEC\u2019s monthly report, due out this morning and coming one day after Crude Oil\u2019s bludgeoning. Yesterday\u2019s U.S. stockpile data was not bearish although headline Crude Oil inventories rose by 1.0 mb versus a drop shown in API. However, EIA\u2019s composite data across Crude and the products was a larger draw than API. Refinery Utilization slipped more than expected, but it is that time of year and Cushing inventories slipped slightly. We find yesterday\u2019s move more tied to profit taking from longs at the critical $85 mark as fears mount the White House could release part of its SPR. Additionally, the U.S. Dollar Index is hitting the highest level since July of last year and budding fears of Covid across Europe could also be working to deteriorate demand outlooks over the coming months. Although we remain very Bullish in Bias over the intermediate and longer-term, we do hold a sense of caution in the near-term.<\/p>\n\n\n\n<p>Technicals: Our caution is due to some of those latter fundamentals, but also the ugly budding weekly bar and third failure at rare major four-star resistance at 84.60-85.00. Upon yesterday\u2019s drop, price action did hold a critical and recurring level of major three-star support at &#8230;&nbsp;<a href=\"https:\/\/www.bluelinefutures.com\/free-trial\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>Click here to get our (FULL) daily reports emailed to you!<\/strong><\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Gold (December) \/ Silver (December)<\/h2>\n\n\n\n<p>Gold, yesterday\u2019s close: Settled at 1848.3, up 17.5<\/p>\n\n\n\n<p>Silver, yesterday\u2019s close: Settled at 24.772, up 0.454<\/p>\n\n\n\n<p>Fundamentals: Gold finally did the two things it had to do; fundamentally capitalize on hot inflation and technically breakout of its downtrend. Price action ripped through a ceiling of resistance at 1836 yesterday morning after inflation data came in higher than expected. We do believe the combination of the Fed\u2019s ultra-dovish taper last week with the first higher than expected MoM Core CPI surge in four months does not fundamentally shift the Federal Reserve\u2019s desired pace of tightening. In other words, a hotter than expected inflation read coupled with a rise in the U.S. Dollar and Treasury rates could not have come at a more opportune time for Gold. Now, can it withstand further gains in both of those through Friday, or would a retreat by the U.S. Dollar and Treasury rates bring an added tailwind to 1900? Today\u2019s slate of economic data is light, but tomorrow brings a fresh November read of the politically infused Michigan Consumer data.<\/p>\n\n\n\n<p><a href=\"https:\/\/www.bluelinefutures.com\/\">Do not miss our Metals Edge video, covering price action across the sector.<\/a><\/p>\n\n\n\n<p>Technicals: Price action did pullback sharply yesterday from the early post-CPI spike as the 30-year Bond fell out. However, this pullback held first key support in each Gold and Silver perfectly and both are now higher despite added gains in the U.S. Dollar overnight. As we have noted many times in recent months, the intraday market has not received higher prices in precious metals very well. It will be critical for Gold and Silver to hold their overnight gains through the first hour of the opening bell. Furthermore, decisive action above major three-star resistance in Gold at &#8230;&nbsp;<a href=\"https:\/\/www.bluelinefutures.com\/free-trial\" target=\"_blank\" rel=\"noreferrer noopener\">Click here to get our (FULL) daily reports emailed to you!<\/a><\/p>\n\n\n\n<p>&#8212;<\/p>\n\n\n\n<p>Originally Posted on November 11, 2021 &#8211; <a href=\"https:\/\/www.bluelinefutures.com\/\">Inflation\u00a0is Back, Can Risk-Assets Withstand It?<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Gold finally did the two things it had to do; fundamentally capitalize on hot inflation and technically breakout of its downtrend. <\/p>\n","protected":false},"author":10,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4,21,5,15,16,17,18,6,8,9,22,23,26,3],"tags":[1056,3446,255,570,3034,678],"contributors-categories":[13588],"class_list":{"0":"post-110938","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-asia","7":"category-commodities","8":"category-europe-middle-east-africa","9":"category-fixed-income","10":"category-forex","11":"category-futures","12":"category-macro","13":"category-north-america","14":"category-region","15":"category-securities","16":"category-stocks","17":"category-technical-analysis","18":"category-text-articles","19":"category-traders-insight","20":"tag-crude-oil","21":"tag-e-mini-sp","22":"tag-gold","23":"tag-inflation","24":"tag-risk-assets","25":"tag-silver","26":"contributors-categories-blue-line-futures"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast SEO v27.3) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Inflation is Back, Can Risk-Assets Withstand It?<\/title>\n<meta name=\"description\" content=\"Gold finally did the two things it had to do; fundamentally capitalize on hot inflation and technically breakout of its downtrend.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.interactivebrokers.com\/campus\/wp-json\/wp\/v2\/posts\/110938\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Inflation is Back, Can Risk-Assets Withstand It? 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