Markets saw two-way action on Tuesday, as the initial broad-based hawkish reaction seen post-PPI (downside in Treasuries and stocks, upside in Dollar) swiftly pared as participants digested the details and awaited remarks from Fed Chair Powell, albeit he said little new with the takeaway arguably him noting confidence in inflation moving back down is lower than it was before. Back to PPI, headline and core PPI M/M metrics were hotter-than-expected, printing 0.5% M/M (exp. 0.3%, prev. -0.1%) and 0.5% M/M (exp. 0.2%, prev. -0.1%), respectively, both outside of the upper bound of the analyst forecast range. Headline Y/Y was in line with expectations at 2.2%, with the previous revised lower to 1.8%; the Core rate was unchanged at 2.4%, as forecast, although analysts note details under the bonnet were more encouraging for PCE than the headline suggests, along with revisions lower to prior data. As such, US indices saw gains (SPX +0.5%, NDX +0.7%, DJIA +0.4%) with outperformance in the RUT (+1.2%) amid continued tailwinds from the AMC (AMC) (+33%), albeit way off earlier highs in excess of 120%. Elsewhere in stocks, Alphabet (GOOGL) (+1%) had its Google O/I event, Musk’s xAI reportedly nears USD 10 billion deal to rent Oracle’s (ORCL) (+4%) AI servers, and Sony (SONY) is reportedly rethinking Paramount (PARA) (-5%) bid. Treasuries pared post-PPI losses and curve steepened, while the crude complex was lower, as US inflation data and OPEC sources weighed. On the latter, Bloomberg source reports noted OPEC+ has reopened fraught debate on members’ oil capacity; UAE, Kazakhstan, Iraq, Kuwait and Algeria are among countries who’s potential to pump more next year is under scrutiny. In FX, the Dollar Index reversed from its post-PPI high of 105.470 to a 104.950 low, as G10 peers (ex-JPY) benefited off the Dollar weakness. USD/JPY hit a high of 156.75, with little in the way of resistance ahead of 157.00. Looking ahead, as mentioned all focus is on US CPI on Wednesday, alongside Retail Sales with a deluge of other data later on. US headline and core PPI M/M metrics were hotter-than-expected. Headline Y/Y was in line with expectations at 2.2%, with the previous revised lower to 1.8%; the Core rate was unchanged at 2.4%, as forecast. The report noted that “nearly three-quarters of the April advance in final demand prices is attributable to a 0.6-percent increase in the index for final demand services. Prices for final demand goods moved up 0.4 percent.” However, analysts note that the details under the bonnet are more encouraging for PCE than the headline figure suggests, along with revisions lower to prior data, so despite the hotter-than-expected M/M metrics the report is not as bad as it appears on first glance. Note, the report comes ahead of US CPI on Wednesday; both the CPI report and the PPI report will be used together to help gauge expectations for the Fed’s preferred gauge of inflation, Core PCE, which is due at the end of the month. US NFIB business optimism index rose to 89.7 in April from 88.5 but remains close to its average during past recessions. Within the report, 22% of owners reported that inflation was their single most important problem in their business, down three points from March but still the number one problem for small business owners. NFIB’s chief economist said that cost pressures remain the top issue for small business owners, and overall, they remain historically very pessimistic as they continue to navigate challenges. Oxford Economics highlights that the recessionary signal is due to an unusually large gap that has opened between the index’s “hard” and “soft” components. The “soft” components, which are made up of firms’ expectations, are at rock bottom levels. In contrast, the “hard” components, which include firms’ hiring and capex plans and the extent of their job vacancies, point to an economy that is cooling but still far from a recession. Overall, as the consultancy says, “reduced hiring plans have driven the recent decline in the ‘hard’ components, but we are not too worried. This is consistent with a lower hiring rate, while layoffs remain low and stable. Small business job creation is normalising from outsized strength last year.” Elsewhere, Oil closed 1.26% lower on Tuesday, while Gold reversed some of Monday’s losses, closing higher by 0.7%.
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For anyone following my Platinum Service it lost 45 points yesterday and is now ahead by 1287 points for May, having finished April with a gain of 4010 points after ending March with a gain of 2113 points. February closed with a gain of 1606 points, after closing January with a gain of 3675 points. December saw a gain of 1890 points after finishing November with a gain of 1734 points. October ended with a gain of 3184 points, after closing September with a small gain of 228 points, after finishing August with a gain of 1485 points, following a small gain of 285 points gain in July, after closing June with a gain of 2683 points. May closed with a gain of 3205 points. April saw a gain of 3354 points while March closed with a gain of 6168 points. The Platinum Service made a record 9619 points last October. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1900 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 0.48% higher at a price of 5246.
The Dow Jones Industrial Average closed 126 points higher for a 0.32% gain at a price of 39,558.
The NASDAQ 100 closed 0.68% higher at a price of 18,322.
The Stoxx Europe 600 Index closed 0.15% higher.
This Morning, the MSCI Asia Pacific closed 0.4% higher.
This Morning, the Nikkei closed 0.08% higher at a price of 38,385.
Currencies
The Bloomberg Dollar Spot Index closed 0.15% lower.
The Euro closed 0.25% higher at $1.0818.
The British Pound closed 0.2% higher at 1.2587.
The Japanese Yen fell 0.15% closing at $156.48.
Bonds
Germany’s 10-year yield closed 4 basis points higher at 2.55%.
Britain’s 10-year yield closed 4 basis points lower at 4.17%.
U.S.10 Year Treasury closed 2 basis points lower at 4.46%.
Commodities
West Texas Intermediate crude closed 1.26% lower at $78.12 a barrel.
Gold closed 0.7% higher at $2355.10 an ounce.
This morning on the Economic Front we have Euro-Zone GDP, Industrial Production and the Employment Change at 10.00 am. Next, we have U.S. MBA Mortgage Applications at 12.00 pm. This is followed by CPI and Retail Sales at 1.30 pm. At 3.00 pm we have Business Inventories and the NAHB Housing Market Index. Finally, we have speeches from Fed Members Kashkari and Bowman at 5.00 pm and 8.20 pm respectively.
Cash S&P 500
Equity Markets totally ignored the rise in yesterday’s PPI prices. While there was an initial downside reaction, it was immediately ignored and focus shifted to March revision numbers which were lower, yet prices clearly went higher. Post PPI all that mattered was a lower Dollar and lower Treasury Yields resulting in the S&P ramping higher in the close. The S&P is now withing 0.3% of all-time highs which will probably happen today after the long-awaited CPI report is released at 1.30 pm. I do not want to over emphasise the mania action in a few stocks but that the fact that following a tweet from ‘’Roaring Kitty’’ (which was viewed by over 19 million people) can even happen is a reflection of markets these days. GME bottomed on April 16 at $9.95 before closing last night at $47 with an RSI of 93 in just madness. Yesterday’s late rally saw the S&P hit my sell range for a now 5248 short position. I will add to this trade at 5266 while raising my stop to a ‘’Closing Price’’ of 5281. The S&P has strong support from 5200/5218 where a number of key Moving Averages are in situ. I will be a buyer on any dip to this are with a tight 5187 ‘’Closing Stop’’ which is just below yesterday’s PPI low print. I will now raise my T/P level on my 5248 short position to 5238. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
EUR/USD
The Euro rose 0.3% yesterday and I am still flat. Ahead of this afternoon’s key CPI data, I will now raise my buy level to 1.0680/1.0750 with a higher 1.0615 ‘’Closing Stop’’. I still do not want to be short the Euro. If this view changes, I will be back with a new update for my Platinum Members.
Dollar Index
I am still flat the Dollar. This morning the Dollar is trading slightly lower at 105.00. I will now lower my Dollar sell level to 105.50/106.20 with a lower 106.85 ‘’Closing Stop’’. I still do not want to be long the Dollar at this time.
Cash DAX
The DAX came nowhere near yesterday’s sell range and I am still flat. I will not chase the market lower despite the number of negative divergences on the Daily Chart. Therefore, I will continue to be a seller from 18830/18920 with the same 19005 ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 18760. I still do not want to be long the DAX at this time.
Cash FTSE
The FTSE continues to trade near Friday’s latest all-time high. The FTSE is still living on the moon following the ramp higher over the past two weeks. This melt up in the FTSE has led to the highest Daily RSI since 2018 at a price of 82. I said in Thursday’s Daily Commentary that this is not sustainable without a major correction. I still stand by this view. I am still short at an average rate of 8380. I will continue to hold this position with no stop for now. If the FTSE continues to defy gravity and move higher, I will look to add to this position. I will also raise my T/P level slightly to 8320. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Dow Rolling Contract
The Dow hit a post PPI low at 39290 before rallying to an afternoon high at a price of 39550. This initial move lower saw my 39370-exit level triggered on my latest 39325 average short position and I am still flat. The recent three-week rally sees the Dow trade at the top of its Daily Bollinger Band. The fact that traders and investors continue to buy every dip is absurd when we have a 185% Market Cap to GDP. As I mentioned yesterday one tweet from Roaring Kitty saw billions of Dollars added to a gaming stock GME from a guy who has absolutely zero involvement with management governance or otherwise is to be honest is Just mind blowing. If anything, this is just a reflection of the gamification of markets that have nothing to do with fundamentals. With this type of appetite where Retail Investors have piled into US Markets this year it makes it extremely difficult to be short. A benign CPI report this afternoon will see another gap higher. The Dow has resistance from 39850/40050 where I will be a small seller with a higher 40205 tight ‘’Closing Stop’’. Financial Conditions have actually tightened over the past few days and for this reason I still do not want to be long the Dow at this time.
Cash NASDAQ 100
Just before the close the NDX rallied to my sell range for a now 18310 short position. I will add to this trade on any further move higher to 18460 while raising my ‘’Closing Stop’’ to a price of 18605. I will now raise my T/P level to 18220. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
March BUND
No Change: I am still long from late Friday at a rate of 130.75. The Bund is trading slightly lower at 130.70 this morning despite Treasury Futures trading higher. I will continue to look to add to this position on any further move lower to 130.05 while leaving my 129.45 ‘’Closing Stop’’ unchanged. I will now lower my T/P level to 131.25. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Gold Rolling Contract
Gold continued to rally after I posted yesterday morning, and I am still flat. I am not going to chase the market higher leaving my 2312/2327 buy level unchanged with the same 2299 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 2339.
Silver Rolling Contract
I am still flat Silver, which is trading higher at 28.55 this morning. Silver has short-term support from 26.90/27.70 where I will be a small buyer with the same 25.95 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 28.40.
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