It was a “sell US” day on Wednesday with equities posting notable losses while Treasuries were sold across the curve, particularly in the long end to see the curve steepen. Amid a lack of data this week (aside from Flash PMIs on Thursday) the US focus has largely been on President Trump’s Tax bill. On which, an agreement has been made on the SALT deductions, although some Republican hardliners are still worried that not enough spending cuts are included in the bill. The CBO estimated the bill would add USD 2.3 trillion to deficits over the next decade, raising fiscal fears. The equity sell-off sharply accelerated in the wake of the 20-year bond auction, which saw a chunky 1.2bps tail and soft bid-to-cover, and led to weakness in Treasuries across the curve, the Dollar and US equities. On the tax bill, House Speaker Johnson has said they will vote on the bill tonight, although the timing is TBC. In FX, the Dollar was the clear laggard with the Japanese Yen outperforming despite higher US Treasury yields. The Australian Dollar saw mild upside versus. the Dollar but retraced some of the post-RBA losses. However, the cyclical currencies (AUD, GBP, NZD) were relative underperformers, excluding the Dollar due to the weakness in US equities. Crude prices settled lower despite overnight strength on reports Israel is considering striking Iran’s nuclear facilities, but a final decision has not been made – crude pared the strength and sold off throughout the session in the risk-off conditions while the EIA data also weighed. Gold was bid as the Dollar, and stocks took a hit. Attention on Thursday looks to the Flash PMI report, and any more tax bill updates. Fed Member Hammack said sentiment data about the economy has been concerning, and that if the Fed is challenged on inflation and unemployment it will be a difficult choice. Hammack added it will take more time to see how business decisions are influenced by trade policy, and echoed the known line that right now the best action for the Fed is to sit on its hands. Fed Member Bostic said he does not expect a recession but unclear when households and firms will feel comfortable making long-run spending decisions. On the most high-profile questions, including trade policy, clarity seems to be moving further into the future. Elsewhere, Oil closed 0.82% lower while Gold continued its move higher with a further gain of 0.75%.
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For anyone following my Platinum Service it made 275 points yesterday and is now ahead by 2760 points for May after closing April with a gain of 7685 points after closing March with a gain of 2254 points while closing February with a gain of 4180 points. January ended with a gain of 2768 points while 1997 points were gained in December. October ended with a gain of 2179 points, after closing September with a gain of 4402 points, following a loss of 301 points in August. July gained 1908 points while June saw a gain of 2074 points. The Platinum Service made a record 9619 points in October 2022. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 2300 points. I have a YouTube Channel which contains recent interviews I have given This can be viewed by clicking HERE Please subscribe to this for new interview notification
Equities
The S&P 500 closed 1.61% lower at a price of 5844.
The Dow Jones Industrial Average closed 816 points lower for a 1.91% loss at a price of 41,860.
The NASDAQ 100 closed 1.34% lower at a price of 21,080.
The Stoxx Europe 600 Index closed 0.04% lower.
This Morning, the MSCI Asia Pacific closed 0.7% lower.
This Morning, the Nikkei closed 0.81% lower at a price of 36,997.
Currencies
The Bloomberg Dollar Spot Index closed 0.51% lower.
The Euro closed 0.39% higher at $1.1327.
The British Pound closed 0.21% higher at 1.3421.
The Japanese Yen rose 0.62% closing at $143.63.
Bonds
Germany’s 10-year yield closed 7 basis points higher at 2.67%.
Britain’s 10-year yield closed 5 basis points higher at 4.76%.
U.S.10 Year Treasury closed 11 basis points higher at 4.59%.
Commodities
West Texas Intermediate crude closed 0.82% lower at $61.52 a barrel.
Gold closed 0.77% higher at $3314.10 an ounce.
This morning on the Economic Front we have German, Euro-Zone and U.K. Composite PMI at 8.30 am, 9.00 am and 9.30 am respectively. Next, we have the ECB Minutes from the April Meeting at 12.30 pm. This is followed by U.S. Weekly Jobless Claims and the Chicago National Activity Index at 1.30 pm, followed by Composite PMI at 2.45 pm. Finally, we have Existing Home Sales at 3.00 pm and the Kansas City Fed Manufacturing Index at 3.30 pm. Meanwhile, Fed Member Williams is speaking at 7.00 pm.
Cash S&P 500
The S&P closed 1.6% lower following the results of the latest Treasury Auction. The US Treasury sold USD 16 billion of 20-year bonds at a high yield of 5.047%, tailing the when issued by 1.2bps. The 1.2bps tail was larger than the six auction average of 0.4bps and compared to the prior auction’s 0.4bps stop-through. The bid-to-cover was also soft at 2.46x, beneath both the prior and average. However, the breakdown was not as woeful with indirect demand seeing a slight decline but was above the six auction average. Direct demand rose, but not as high as the six auction average. This left dealers with 16.9% of the auction, little changed from the prior, and slightly above the 15.7% average. Although the internals were not too bad, the chunky tail and soft bid-to-cover is noteworthy. US Treasury to sell USD 18 billion of 10 Year TIPS this evening at 6.00 pm. None of this should have been a surprise, as I have been highlighting the overly bullish options positioning, the risk to upside in rates, and the unpinning of the VIX yesterday. It just finally caught up. The 30-year was up more than 12 bps on the day and closed at 5.09%, the highest close since October 2023. Can 30-year rates go higher? Yes, they can go much higher, perhaps to 5.5% before this move is over. At least that is what the Daily chart suggests. Meanwhile, if the 10-year can manage to rise above 4.6%, there is little stopping it from rising to 4.8%. More importantly, rates are rising for a couple of reasons, including rising inflation expectations, as noted by the 2-year inflation swap, and rising term premiums due to massive deficits and growing debt. This is another reason is that the Fed will make fewer rate cuts, with the December Fed Funds Futures now pricing in less than two cuts in 2025. Of course, the critical reason is that rates are rising globally. Japan just had trouble auctioning off its bonds, and the UK reported hotter inflation. So, if rates are going to move up globally, then rates in the US will not be spared. At this point, it would seem that the S&P 500 broke through its uptrend of 5900 which I highlighted yesterday, and I guess you could even call it a rising wedge. The next stop for the Index would be at the gap fill from May 12, and back to 5,660 or so. Buying the S&P here seems wrong to me. The S&P is trading 22 times forward earnings which is at the upper end of the valuation range. Why buy stocks when the Bond Markets are offering a decent return especially if you do a short duration. Yesterday my S&P plan was near perfect as the market hit my 5936 sell level before falling over 100 Handles. Unfortunately ahead of the 20 Year Auction I covered this position at my revised 5928 T/P level and I am now flat. Shorting the S&P is a difficult trade as the appetite to buy the dip is unrelenting. On Monday, following Moody’s Downgrade, Retail Investors bought $4.1 billion of U.S. stocks during the first three hours which is the most in history. The same happened yesterday as three hours into Wednesday’s session both the NASDAQ Indexes made new intraday highs for the April-May rally before tanking post the auction. The S&P will have short-term resistance from 5890/5910 where I will be a small seller with a lower 5925 ‘Closing Stop’. The S&P will have short-term support at its 200 Day Moving Average (5767). Therefore, I will be a buyer on any further dip lower to 5755/5775 with a 5739 tight ‘Closing Stop’. If I am taken long, I will have a T/P level at 5801. If I am taken short, I will have a T/P level at 5868.
EUR/USD
I am still flat the Euro. This morning, the Euro is trading higher unchanged from where I marked prices yesterday morning. The Euro has short-term resistance from 1.1410/1.1490 where I will be a small seller with a 1.1555 ‘Closing Stop’. If I am taken short, I will have a T/P level at 1.1340. I will leave my buy level unchanged at 1.1190/1.1270 with the same 1.1125 ‘Closing Stop’. If I am taken long, I will have a T/P level at 1.1340.
Dollar Index
I am still flat. Today, I will continue to be a buyer on any dip lower to 98.40/99.20 with a 97.75 ‘Closing Stop’. If I am taken long, I will have a T/P level at 99.70.
Russell 2000
I am still flat. The Russell is trading lower at 2045 this morning. I will now lower my buy level slightly to 1940/2020 with the same 1895 ‘Closing Stop’. If I am taken long, I will have a T/P level at 2070. I still do not want to be short the market at this time.
FTSE 100
I am still flat as the FTSE continues to trade close to all-time highs. I will now raise my FTSE buy level to 8590/8670 with a higher 8525 ‘Closing Stop’. If I am taken long, I will have a T/P level at 8720. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Shortly after I posted yesterday morning, the Dow traded lower to my 42280-buy level before rallying to my revised 42365 T/P level and I am now flat. This was a lucky cut as the Dow subsequently fell over 600 points into the close. The Dow will have short-term resistance at its 200 Day Moving Average (42318). I will now be a small seller from 42250/42490 with a tight 42605 ‘Closing Stop’. My only interest in buying the Dow is on a further move lower to 40800/41050 where I will be a small buyer with a 40595 ‘Closing Stop’. If I am taken short, I will have a T/P level at 41980. If I am taken long, I will have a T/P level at 41420.
Cash NASDAQ 100
Frustrating! After the NDX rallied to my 21450-sell level the market fell 400 points. Unfortunately, I had a typo error with my T/P level at 21340 which should have read 21240. I am now flat. The NDX has short-term resistance from 21320/21520 where I will be a seller with a lower 21705 ‘Closing Stop’. If I am taken short, I will have a T/P level at 21170.
December BUND
Higher Treasury Yields sees the Bund trading lower at 129.80 this morning. Today, I will continue to be a buyer on any dip lower to 128.50/129.30 with the same 127.75 ‘Closing Stop’. I still do not want to be short the Bund at this time. If I am taken long, I will have a T/P level at price of 129.90
Gold Rolling Contract
I am still flat. I will not chase Gold higher as I leave my 3220/3245 buy level unchanged with the same 3199 ‘Closing Stop’. If I am taken long, I will have a T/P level at 3268.
Silver Rolling Contract
I am still flat. Silver has short-term support from 31.50/32.50 where I will again be a buyer with the same 29.95 wider ‘Closing Stop’. If I am taken long, I will have a T/P level at 33.20.
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