U.S. Indices surged on Monday as risk-on trade was seen to start the week amid the positive trade developments between the US and China, whereby both countries agreed to cut tariffs by 115ppts, in what was a much larger drop than expected. The combined 145% US tariffs on China and China’s levies on US goods will drop to 30% and 10%, respectively. In wake of the news, global risk-on trade was seen with downside in fixed income and gold, and upside in the Dollar, US equities, and crude. Given the readout was in the European morning, it set the tone for the duration of the US session with the aforementioned moves firmly holding, with notable gains seen in US indices, and weakness across the Treasury curve. Despite the geopolitical angst, the crude complex was buoyed although benchmarks traded some way off earlier peaks amid potential profit-taking. In FX, the Dollar was bid to the detriment of G10 FX peers, although safe-havens (JPY, CHF) lagged, and high beta FX were the relative outperformers given the risk environment. As expected, trade headlines dominated the slate and there was little else new with no US data and a lack of pertinent Fed speak. However, US President Trump signed an executive order on drug prices and they could come down from 59% to 80-90% and he will no longer tolerate profiteering from Big Pharma. The US and China agreed to reduce tariffs by 115ppts for 90 days. In the joint statement, it noted the US is to cut tariffs on Chinese goods to 30% from 145% and China to cut tariffs on US goods to 10% from 125% for 90 days. The US will modify the application of rate of duty on articles of China by suspending 24ppts of that rate for an initial period of 90 days. The US will retain the remaining rate of 10% on those articles; China is to retain the remaining ad valorem rate of 10% and remove the modified rate. Throughout the day US Treasury Secretary Bessent had numerous appearances, where he noted over the next 90 days they will see, but has to be fair for the American people. When asked if he considers the new level a ceiling or a floor, stated it “is obviously a floor”. Said the 34% April 2nd level is a ceiling. Not saying tariffs will go up, but it is implausible that the tariff level will go below 10%. The first level is that there will be a phone call with Trump/Xi, and there is nothing currently scheduled. Can always go back to April 2nd level for China tariffs. The 20% fentanyl tariff imposed by the US will remain, with Bessent believing China is now serious about halting fentanyl flows in the US. USTR Greer said as it stands, the fentanyl issue remains unchanged. In addition, Reuters sources noted that the US-China trade deal does not cover “de minimis” exemptions for e-commerce firms and White House Press Secretary Leavitt said unfreezing rare earth was part of US-China discussions. Fed Member Goolsbee said tariffs would still have a stagflationary impulse, the New York Times reports, and the temporary nature of the US/Chian deal would weigh on the economy. The bar for action has to be high, and again endorsed the waiting approach due to uncertainty and the central bank could afford to take time for policy decisions. Meanwhile, Kugler said trade policy is shifting but still likely to lead to higher prices and slower growth; it has become hard to judge the underlying growth of the economy. On inflation, she noted progress on disinflation has slowed, and still expects an increase in prices and slowdown in the economy, though not to the same rate as before. Additionally, she believes there could be some permanency from price increases related to tariffs. On the labour market, stated conditions are mostly stable. Regarding policy/rates, the Fed is in a good position to deal with changes in the macroeconomic outlook. Lastly, on tariffs, said if long-lasting, she would look into how supply chains get rearranged in the rest of the world, and remarked the US/China tariff reduction is obviously an improvement as far as trade between countries goes, still pretty high. Elsewhere, Oil closed 1.3% higher while Gold was weak, ending Monday’s session with a 3% loss.
To mark my 3175th issue of TraderNoble Daily Commentary I am offering a special 2-Year Rate of Euro 2750 for my Platinum Service which includes 1 to 4 updated emails throughout the trading day to demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. If anyone is interested in this offer can you please email me on bryan@tradernoble.com for details
For anyone following my Platinum Service it lost 810 points yesterday and is now ahead by 2078 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 3.26% higher at a price of 5844.
The Dow Jones Industrial Average closed 1160 points higher for a 2.81% gain at a price of 42410.
The NASDAQ 100 closed 4.02% higher at a price of 20,868.
The Stoxx Europe 600 Index closed 1.21% higher.
This Morning, the MSCI Asia Pacific closed 1.2% higher.
This Morning, the Nikkei closed 1.81% higher at a price of 38,326.
Currencies
The Bloomberg Dollar Spot Index closed 1.54% higher.
The Euro closed 1.43% lower at $1.1087.
The British Pound closed 0.92% lower at 1.3181.
The Japanese Yen fell 2.06% closing at $148.30.
Bonds
Germany’s 10-year yield closed 11 basis points higher at 2.66%.
Britain’s 10-year yield closed 8 basis points higher at 4.65%.
U.S.10 Year Treasury closed 7 basis points higher at 4.45%.
Commodities
West Texas Intermediate crude closed 1.31% higher at $61.86 a barrel.
Gold closed 2.93% lower at $3226.10 an ounce.
This morning on the Economic Front we have the German and Euro-Zone ZEW Survey at 10.00 am. This is followed by U.S. NFIB Small Business Optimism Index at 11.00 am. At 1.30 pm we have CPI. Finally, at 4.00 pm we have a speech from Bank of England Governor Bailey.
Cash S&P 500
The major U.S. stock market indexes soared at Monday’s open and finished up across the board. The benchmark S&P 500 Index finished up 3.3%… the tech-heavy Nasdaq Composite Index gained 4.3%… the small-cap Russell 2000 Index was 3.4% higher… and the Dow Jones Industrial Average closed up 2.8%. Notably, the CBOE Volatility Index (“VIX”) – a measure of implied volatility based on bullish or bearish options bets on the S&P 500 – closed below 20 at 18.25, with a 17% fall to its lowest level since the end of March. Goodbye, fear. Everything but the utilities sector was higher in the S&P 500. Market and industry bellwethers were also up – like retail and tech giant Amazon (AMZN) up 8%… shipping giant Maersk (AMKBY) up almost 10%… and FedEx (FDX) shares 7% higher. Gold, one of the favorite recent winners from the “chaos,” lost 3%… but is still up 20% for the year, trading around $3,250 per ounce. Bitcoin, which hit $105,000 as the U.S.-China news broke, gave back some gains yesterday -. but remains up roughly 30% from its early April low. At a press conference yesterday afternoon, before heading to the Middle East on Air Force One, Trump talked up China “opening up” trade to the U.S. He said that both sides can be winners, while lamenting that neither of the trade deals he negotiated with China during his first term have fulfilled what he imagined. What comes next is hard to say. Mr. Market has no “worst-case scenario” thoughts anymore, but there will still be impacts. A 30% tariff on Chinese imports remains in play, which is close to the original “Liberation Day” number (34%). But when we look at price action in the market, one belief seems widespread: The Liberation Day unwind is complete. From the looks of it, we will move on to more “normal” concerns now – government spending, inflation, jobs, and the like, with a new tax and spending bill and debt-limit talks happening in Washington. But I will keep my eyes out for any market surprises. And while the “worst” tariff impacts may be delayed and I do expect a few promising-sounding trade “deals” to come from the White House soon – probably next week after Trump’s tour of the Middle East – trade-related risks remain. Global supply chains have already been unsettled to some degree and prices may rise because of it – small businesses are stressed – the labour market is showing some weakness – and I would not blame any person or business for not believing in any certainty from the federal government. But for now, market fear has been soothed. The S&P 500 is above its 200-day moving average – a simple technical measure of a longer-term trend – for the first time since March 26. If you “stayed the course,” and even acted on good buying opportunities amid the panic a few weeks ago, congratulations. But keep an eye out now for what is next. Monday was a dramatic day for the markets. I cannot remember a time when the S&P opened with such a large gap from Friday’s close. This move higher has now left a 130 Handle Gap which is insane, while the S&P at Monday’s high was 1040 Handles above the April 7 panic low. The S&P is now severely overbought as shown by the $BPSPX closing at 76 while the $BPNDX is even more overbought closing at an unsustainable 82 print. Not helping the Trump administration was the 10 basis points rally in 10-year Treasuries’ to 4.45%, making servicing this massive debt at very expensive prices. The S&P has now left five ‘Open Gaps’ below while the 15-minute chart is extremely overbought. There are now plenty of reasons for a pullback in the second half of May. However, given the record number of buybacks happening currently any sell-off should be short-lived. Yesterday’ s tariff announcement shortly after I posted saw my second sell level at 5770 triggered for a 5758 average short position. I was stopped out of this position at 5815 and I am now flat. The S&P has short-term resistance from 5845/5861 where I will again be a seller with a higher 5876 ‘Closing Stop’. The 200 Day Moving Average comes in at 5750 this morning. Any dip to this area will attract strong buying. Therefore, I will be a buyer from 5740/5760 with a 5725 ‘Closing Stop’. If I am taken short, I will have a T/P level at 5818. If I am taken long, I will have a T/P level at 5785.
EUR/USD
The Euro got hit hard on Monday, trading the whole of my buy range for a now 1.1140 average long position. I will leave my 1.1045 tight ‘Closing Stop’ unchanged while lowering my T/P level to 1.1220. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Dollar Index
The Dollar surged 1.4% yesterday and I am still flat as I had no sell level in Monday’s Daily Commentary. The Dollar is now short-term overbought, has resistance from 102.30/103.00 where I will be a small seller with a 103.65 ‘Closing Stop’. If I am taken short, I will have a T/P level at 101.70. I will not chase the market higher as I continue to be a buyer on any dip lower to 98.70/99.50 with the same 96.95 ‘Closing Stop’. If I am taken long, I will have a T/P level at 100.20.
Russell 2000
I am still flat. The Russell closed 3% higher last night at a price of 2095. I will now raise my buy level to 1950/2030 with a higher 1885 ‘Closing Stop’. If I am taken long, I will have a T/P level at 2080. I still do not want to be short the market at this time.
FTSE 100
My FTSE plan worked well as the market rallied to my 8640-sell level before trading lower to my 8590 T/P level and I am now flat. Today, I will again be a seller on any further rally to 8670/8740 with a higher 8805 ‘Closing Stop’. If I am taken short, I will have a T/P level at 8620. I still do not want to be long the FTSE at this time.
Dow Rolling Contract
Wrong! Sometimes you get caught by a ‘wrong headline” and there is not a lot you can do about it unfortunately. The Dow traded the whole of Monday’s sell range for a 42000 average short position before stopping me out of this trade at 42305 and I am now flat. The Dow closed just above its 200 Day MA which comes in at a price of 42249 this morning. Given the extent of Monday’s 1000-point rally I am going to stay flat the Dow to see how the market reacts to yesterday’s gain. If this view changes, I will be back with a new update for my Platinum Members.
Cash NASDAQ 100
Wrong! Monday’s aggressive 4% rally saw the NDX hit my second sell level at 20680 for a 20580 average short position before stopping me out of this trade at 20805 and I am now flat. With the $BPNDX closing at an extremely overbought reading of 82 I have no choice but look to sell any rallies from here. When we get the $NYSI Weekly reading this morning it will confirm a maximum overbought print, which is another strong reason to be short. The PMOBUYALL Index that I wrote about yesterday will even be more overbought following yesterday’s surge across the board. The NDX has short-term resistance from 20850/21000 where I will be a strong seller with a higher 21205 ‘Closing Stop’. If triggered, I will have a T/P level at 20610.
December BUND
I am still flat. The Bund got hit hard yesterday, closing below 130 as Yields rose by 12 Basis Points since Thursday. This is not an insignificant move. The Bund is now short-term oversold. We have support from 128.50/129.30 where I will be a small buyer with a 127.85 ‘Closing Stop’. If I am taken long, I will have a T/P level at 129.95.
Gold Rolling Contract
My Gold plan worked well as the market traded the whole of Monday’s range for a 3225 average long position before rallying to my revised 3241 T/P level and I am now flat. This morning, Gold is trading at 3250. We have short-term support from 3155/3180 where I will be a strong buyer with a lower 3139 ‘Closing Stop’. If I am taken long, I will have a T/P level at 3205.
Silver Rolling Contract
The weakness in Gold saw Silver trade lower to my 32.00 buy level. Overnight the market rallied to my 32.80 T/P level and I am now flat. Today, I will again be a buyer on any dip lower to 31.50/32.30 with the same wider 29.95 ‘Closing Stop’. If triggered, I will have a T/P level at 33.10.
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