Volatility continued on Wednesday but ultimately equities saw historic upside (SPX +9.5%, NDX +12.0%, RUT +8.7%, DJI +7.9%) as US President Trump implemented a 90-day pause on reciprocal tariffs to the 75 countries who approached the US for talks, seeing their tariff rates drop to the baseline 10% to allow time for negotiations. However, Trump also announced he will be increasing China tariffs even higher to 125% from 84% after China responded to the additional US tariffs, by implementing 84% tariffs, up from 34%. Bonds were incredibly choppy but settled well in the red with chunky selling pressure seen overnight. The 10 Year Auction was very strong thanks to stellar indirect demand offsetting the dire direct demand. In response to the Trade updates, the Dollar rallied from lows with the Dollar Index closing above 103 from a morning low of83, while havens were sold with USD/JPY rising to a peak of 148.27 from lows of 144.01, while the Swiss Franc also plummeted. Gold prices rallied throughout the session but sold off on Trump’s reciprocal tariff pause, before buying resumed. Crude prices surged from lows of USD 55.12/bbl to peaks of USD 62.93 as recession risks faded on Trump’s tariff pause. Money markets now only fully price in three cuts from the Fed in 2025, versus the four priced on Tuesday. US President Trump announced a 90-day pause on reciprocal tariffs with the countries who have been in talks with the US for a trade deal. This takes trading partners’ tariffs to the baseline 10% level, for the 90-day period, giving trading partners time to negotiate a deal. However, Trump responded to China’s response, and lifted tariffs on China to 125% from 104%, after China raised tariffs on the US to 84% from 34%. Note, that there is still a lot of unknowns about Trump’s latest 90-day pause. On Canada and Mexico, a White House official clarified that there is no change to tariffs for these two economies, and more widespread there is no change to autos, steel, aluminium. Meanwhile, Trump said the reciprocal tariff pause was for those who have called the US to negotiate on “Trade, Trade Barriers, Tariffs, Currency Manipulation, and Non-Monetary Tariffs”, and “these Countries have not, at my strong suggestion, retaliated in any way, shape, or form against the United States”. It is not clear if exemptions refer to the EU or not, as earlier the EU Commission said it will impose first countermeasures against the US on April 15th with a retaliation of 10-25% on US imports (so they have not been implemented yet), noting it secured backing from EU countries for the first countermeasures against US tariffs. However, it said countermeasures can be suspended at any time, should the US agree to a fair and balanced negotiated outcome. The minutes of the Fed March 19th meeting noted that all participants viewed it appropriate to keep interest rates unchanged in light of elevated uncertainty around economic outlook. Participants remarked uncertainty about the net effect of government policies on the outlook was high, making it appropriate to take a cautious approach, and assessed that FOMC was well positioned to wait for more clarity on the outlook. Some participants observed the FOMC may face difficult tradeoffs if inflation proved more persistent while the outlook for growth and employment weakened. A few participants cautioned an abrupt repricing of risk in financial markets could exacerbate the effects of any negative economic shock. On inflation, a majority of participants noted the potential for inflationary effects from various factors to be more persistent than they projected. Almost all participants viewed risk to inflation as tilted to the upside, with risks to employment as tilted to the downside. Several participants emphasized that elevated inflation could prove to be more persistent than expected. On the balance sheet, almost all participants supported slowing the pace of balance sheet runoff, but several did not see a compelling case for a slower runoff pace – implying some non-2025 voters agreed with Waller to not slow the pace of the balance sheet runoff. Fed Member Musalem expects US economic growth this year will be materially below the estimated 2% trend, but the baseline outlook is not for a recession. However, slipping confidence, higher prices and a blow to household wealth point to slowing growth. The St Louis Fed President said that financial conditions have tightened, but he does not see market dysfunction in recent volatility. He noted markets are responding to reassessments of global growth. Musalem noted that going forward, the Fed has tension between its dual mandate goals as risks of slower growth and higher inflation begin to materialise. He noted that inflation expectations remain anchored and it is necessary for the Fed to keep them that way. Musalem warned it is risky to assume the Fed can look through higher prices from tariffs and there is a chance some effects could persist. He will be taking a balanced approach to monetary policy as long as inflation expectations remain anchored. Business contacts say they are not turning to layoffs but are taking a wait-and-see approach to hiring and capital spending plans. Meanwhile, Fed Member Barkin who is the Richmond Fed President said he is watching consumers closely, and he would worry if the US was close to a moment where consumers decide to pull back, however so far this has not happened. He warned the trade war is likely to cause fewer jobs and higher prices, but price hikes may not show up until the summer as companies work through pre-tariff inventories. Barkin thinks the impact of tariffs is going to hit both inflation and unemployment, noting some of the shifts risk being both inflationary and negative for unemployment. He said the data is still perfectly solid, but he thinks people are wondering whether consumer spending is part of the economy is at risk. Barkin also noted how in his talks to contacts, companies typically have 30-60 days’ worth of pre-tariff inventory to work through, so for impact on prices, it will likely be more about June than April. He also noted that a home improvement manufacturer said they’re not going to do the Memorial Day promotion that they would normally do, as they only have a limited amount of inventory at a lower cost. Barkin also noted there may well be disinflationary forces too, citing lower oil prices and the impact of retaliation on some of their export manufacturing. Elsewhere, Oil surged 5.8% while Gold had is biggest one-day rally since 2016, closing Wednesday with a gain of 3.81%.
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 made 3185 points yesterday and is now ahead by 5410 points for April 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 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 9.52% higher at a price of 5456.
The Dow Jones Industrial Average closed 2962 points higher for a 7.87% gain at a price of 40,608.
The NASDAQ 100 closed 12.02% higher at a price of 19,145.
The Stoxx Europe 600 Index closed 3.5% lower.
Yesterday, the MSCI Asia Pacific closed 2.6% lower.
Yesterday, the Nikkei closed 3.93% lower at a price of 31,714.
Currencies
The Bloomberg Dollar Spot Index closed 0.02% lower.
The Euro closed 0.17% lower at $1.0938.
The British Pound closed 0.15% higher at 1.2811.
The Japanese Yen fell 1.43% closing at $148.02.
Bonds
Germany’s 10-year yield closed 3 basis points lower at 2.58%.
Britain’s 10-year yield closed 19 basis points higher at 4.81%.
U.S.10 Year Treasury closed 9 basis points higher at 4.35%.
Commodities
West Texas Intermediate crude closed 5.4% higher at $62.80 a barrel.
Gold closed 3.81% higher at $3096.10 an ounce.
This morning on the Economic Front we have no data of note from either the UK or the Euro-Zone. At 1.30 pm we have U.S. Weekly Jobless Claims, CPI and Building Permits. At 6.00 pm we have a 30-Year Treasury Action. Meanwhile, Fed Members, Logan, Schmid, Bowman, Goolsbee and Harker are all speaking at 2.30 pm, 3.00 pm, 3.05 pm, 5.00 pm and 5.30 pm respectively.
Cash S&P 500
A little after 1:15 p.m. Eastern time yesterday, the major U.S. stock indexes suddenly jumped higher… up 4%… 7%… 9%… and ultimately all the way to 12% in the case of the Nasdaq Composite Index following a post from the U.S. President. Trump began by saying he is raising tariffs on China to 125%, but then he announced he is suspending almost all of the “reciprocal” tariffs on some 75 countries that went into effect at 12:01 a.m. this morning: “I have authorized a 90 day PAUSE…” This post might be made into a piece of Wall Street art at some point… or maybe a non-fungible token. The market’s reaction was instantly overwhelmingly positive. I do not think I have ever seen the stock market move so high so quickly. There was an initial spike higher, followed by steady buying for the last two hours of the trading day. The tech sector of the S&P 500 finished up 13%, led by semiconductors, and consumer discretionary stocks closed 11% higher. Airlines like United Airlines (UAL) and Delta (DAL) were 26% and 23% higher, respectively. Trump and the White House have signaled over the past several days that they have been negotiating with trading partners, but this written “pause” was clearly welcomed. The tech-heavy Nasdaq finished 12% higher for the day, the benchmark S&P 500 Index was up more than 9%, and the small-cap Russell 2000 Index and the Dow Jones Industrial Average closed up around 8%. Bitcoin is up 7% over the past 24 hours and oil prices are more than 4% higher. Three or six months from now, I suspect we may look back on this week as an important low in the market, though we cannot guarantee it. Wednesday’s move, as big as it was, only brought the Indexes back to where they were on Thursday or Friday of last week. Wednesday was the biggest one-day gain for the S&P 500 since a roughly 11% gain in late October 2008, back when there were major swings higher and lower in stocks amid the market crash during the great financial crisis. You may recall the market did not ultimately hit a bottom for that period until March 2009. By closing time last night, the CBOE Volatility Index (“VIX”) was around 33. That is more than 30% lower than its intraday high of around 50, but still higher than usual. Some call this Index the market’s “fear gauge.” It measures implied volatility based on options bets (bullish or bearish) on the S&P 500 over the next 30 days or so. The higher the number, the more uncertainty is in the air about the direction of U.S. stocks. In a typical sell-off, the VIX might come in somewhere near 20 or 25. Until Trump’s afternoon delight, the VIX was around 50 for three straight days, an environment we last saw during the COVID-19 panic in March 2020. The state of the U.S. Treasury Market – and whether a “crisis” is near – has also been making headlines… including whether it might force the Federal Reserve into a kind of rescue action sooner rather than later (like in March 2020). Since April 4, the 10-year Treasury yield had jumped almost 40 basis points, a notable move in a short time period. It moved close to 4.5%. Similarly, the 30-year Treasury yield had gone from 4.4% to around 5.00% yesterday morning. Meanwhile, the two-year yield – more associated with short-term Federal Reserve policy (and near-term growth and interest-rate expectations) – had fallen from 4.4% in February to 3.7%. Trump took note, and when asked this yesterday if the bond market persuaded him to reverse the tariffs, he said ‘I saw last night where people were getting a little queasy’. That is a telling admission to me that the health of the bond market does matter to Trump. Wednesday was one of the best trading sessions ever for my Platinum Service. I flagged in Wednesday’s Daily Commentary the importance of the McClellan Oscillator once we get print of -250 or higher generally leads to a 4% rally in the S&P in the coming days. Yesterday was one of those historic moments with the S&P closing 9% higher while the MO moved from Tuesday’s -255 print to last night’s -87 close. On my exiting 4895 long S&P position I covered this at a price of 4995 before buying the Market again at a price of 4900. Unfortunately, I covered this position too early at 5015 and I am now flat. I S&P is now short-term overbought and has resistance at the 20 Day Moving Average which comes in at 5503 this morning. I am reluctant to sell the market. However, I will be a small seller on any further rally to 5530/5560 with a tight 5581’Closing Stop’. If triggered, I will have a T/P level at 5483. What may surprise you is the fact that I do not want to be long the S&P as I want to see how the market reacts to Wednesday’s surge and of course the CPI Report. If this view changes I will be back with a new update for my Platinum Members.
EUR/USD
The Euro hit a high above 1.1090 before selling off 150 points into the New York close. I am still flat. Ahead of this afternoon’s key CPI Report, I will continue to be a buyer on any dip lower to 1.0800/1.0880 with a the same 1.0725 Closing Stop’. If triggered, I will have a T/P level at 1.0950. I still do not want to be short the Euro at this time.
Dollar Index
I am still flat. Today, I will continue to be a seller on any further rally to 103.70/104.40 with the same 105.05 ‘Closing Stop’. If I am taken short, I will have a T/P level at 103.05.
Russell 2000
My latest long 1735 Russell position worked well as the market rallied to my 1810 T/P level and I am now flat. This morning the Russell is trading higher at a price of 1924. The Russell has short-term support from 1790/1860 where I will be a small buyer with a higher 1715 ‘Closing Stop’. If I am taken long, I will have a T/P level at 1920.
Cash FTSE
My latest 7690 long FTSE position worked well as the market rallied to my 7780 T/P level and I am now flat. Obviously, my T/P level was too tight with the FTSE trading at 8140 as I go to post this morning. The FTSE has resistance from 8250/8330 where I will be a seller with a 8405 ‘Closing Stop’. Given the fact that U.K. Gilt Yields closed at their highest level since 1998 I do not want to be long the FTSE at this time despite the aggressiveness of Wednesday’s move higher. If this view changes, I will be back with a new update for my Platinum Members.
Dow Rolling Contract
My Dow plan worked well as the market sold off to my 36750-buy level before rallying to my revised 37560 T/P level and I am now flat. With the Dow trading above 40800 I have no edge on where the next major move in the Dow comes from here. Despite a few wobbles we are having an excellent month so there is no need to take undue risk. From experience a trader can get cocky after making large gains only to see these evaporate on a stupid call. Personally, I withdrew a large portion of my margin funds with my broker last night to stop me taking a large trade at these levels. I will stay flat until I return on Monday unless we get a sudden surprise move on this afternoon’s CPI Report. If this view changes, I will be back with a new update for my Platinum Members.
Cash NASDAQ 100
Wow! The NDX hit a low at 16630 yesterday morning before rallying almost 16% off this low into the close. I have never seen such a move by a major Index and I doubt we will ever see such a move again. Most of the MAG7 stocks rallied by over 18% yesterday as yet again anyone trying to short the market for any length of time is destroyed. This move higher saw me exit my aggressively long 18560 NDX position at my revised 18610 T/P level and I am now flat. The NDX has resistance well above the market from 19700/19900 where I will be a small seller with a 20105 wider ‘Closing Stop’. My only interest in buying the NDX is on a large drop lower to 18100/18300 with a 18995 tight ‘Closing Stop’. If I am taken short, I will have a T/P level at 19470. If I am taken long, I will have a T/P level at 19480.
December BUND
No Change: Tuesday’s Three-Year Treasury Auction was dismal with the third widest ‘Tail’ in history. The two previous times were during COVID and during the 2023 Banking Crisis. Treasury yields have risen 40 basis points from last Friday’s 3.86 pre-NFP release on strong rumours that the Chinese are selling Treasuries in significant amounts. Meanwhile, the Bund continues to ignore the higher Treasury Yields for now. I am still flat the Bund as I continue to be a seller from 131.30/132.30 with the same 133.05 ‘Closing Stop’. If triggered, I will have a T/P level at 130.40. I still do not want to be long the Bund at this time.
Gold Rolling Contract
Gold had its largest one-day rise since 2016, closing higher by almost 4%, trading at a price of 3084 as I go to press. Gold has resistance from 3140/3160 where I will be a small seller with a 3175 ‘Closing Stop’. If triggered, I will have a T/P level at 3115.
Silver Rolling Contract
No Change: I am still flat Silver as I continue to be a strong buyer on any further move lower to 28.30/29.30 with the same 26.95 ‘Closing Stop’. If triggered, I will have a T/P level at 30.20.
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