As expected, the energy sector in the commodity complex exploded higher to start the week.
As expected, the metals sector trailed in the distance as investors continued to move money to the safe haven of gold and silver.
As expected, US stock index futures were under continued pressure due to the perception that future rate cuts will be reversed due to rising inflation.
Morning summary: Welcome to the first business day of the spring season. Last weekend might have been even more difficult if it included the annual “spring forward” event of losing an hour as daylight savings time begins. (The madness begins next weekend.) From Friday night into Saturday morning, as the final hours of the Dog Days of Winter, also known as February, were set to draw to a close, the President of the United States reportedly cried foul and let the dogs of war loose. According to the news, referring to the pre-made video of the President, the US military has launched a “major combat operation” in Iran. He added: “Our goal is to defend the American people by eliminating the potential threat posed by the Iranian regime, a brutal group of extremely violent, fearful people…” The truth is somewhat different. While the action is the same – what could be considered an illegal military action by the United States against Iran – the goal is actually to increase the price of crude oil, the main commodity bought from Venezuela in early January.
Energy: All eyes were on the energy sector heading into Sunday night’s opening. Looking at last week’s performance, we can say that something happened as the spot month WTI contract closed higher at $1.81 in buying from both non-commercial and commercial interests. When this week’s opening bell rang, the global Brent (QAK26) market was up as much as $9.24 (12.7%) while WTI (CLJ26) was up $8.31 (12.4%), to $75.33. By Monday morning, both had withdrawn about $4. It is no surprise that trading volume was high in the spot month with the WTI issue changing hands at this writing with more than 405,000 contracts. Also not surprisingly, the pullback in the market strengthened at least through the September 2026 issue. Meanwhile, the spot month extraction contract (HOJ26) added 45.25 cents (17.4%) – yes, you read that correctly. I double and triple checked the numbers. – while RBOB gasoline (RBJ26) increased by 21.0 cents (9.2%). Given this intentional inflation spike, it means that the US Dollar Index ($DXY) has stabilized at 0.96 as interest rates are not coming down any time soon.
Metals: Speaking of commodities rallying against a strong dollar, Monday morning’s Barchart futures market heatmap shows the metals sector just following the overnight energy high, albeit by a significant margin of 7.5% to 0.5%. Still, markets were impressive overnight as safe-haven gold (GCJ26) gained as much as $186.20 (3.5%) and was still sitting higher at $150 (2.9%) at this writing. I’ve been saying this for months/years: We can’t apply technical or fundamental analysis to the gold market because it’s the most reliable safe haven market on the planet these days. (If you’re arguing that it should be Bitcoin, we can’t be friends.) As I pointed out recently, Barchart produced a piece showing that foreign central banks now hold more gold than US Treasuries for the first time in nearly 30 years. There is a good reason for this: a lack of confidence in the United States as a global leader. End of story. But gold wasn’t alone overnight, as silver (SIK26) added $4.00 (4.3%) before falling by mid-morning Monday. The Dr. Copper (HGK26) economic index was actually sitting in the red at this writing after jumping 3.6 cents (0.6%) earlier.
Equality: It should come as no surprise that US stock index futures were lower overnight in the pre-dawn hours. Again, looking at the financial markets last week, we can see cracks forming in the three major US stock indexes. Based on an analysis of long-term monthly charts, while both the S&P 500 and Dow Jones Industrial Average can still be classified in uptrends, both showed signs of reversal as February ended. The S&P was down 60.15 points for the month while the Dow opened the door to a horseshoe close (close enough) on a possible bearish spike reversal. (For the record, the Dow hit a new all-time high of 50,512.79 last month before closing at 48,977.92, down just 85.58 (0.2%)). A look at the quotes screen on Monday morning found S&P 500 futures (ESH26) down as much as 120.5 points (1.75%), Dow futures (YMH26) down as much as 834 points (1.7%), and Nasdaq futures (NQH26) down more than 527.7.25%. Something to think about heading into this week is that currency markets will not like rising inflation to hold off on rate cuts indefinitely. Note that the Fed Fund futures forward curve had already moved forward in July.
As of the date of publication, Darren Newsom had no position (either directly or indirectly) in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
