U.S. Indices closed mixed on Tuesday with outperformance in the NASDAQ 100 while Russell underperformed while both the S&P and Dow were roughly flat. Sectors were also mixed with outperformance in Communication, Consumer Discretionary and Energy, while Utilities, Health Care, Real Estate and Consumer Staples heavily underperformed (all defensive sectors). T-Notes bull steepened with the curve catching a bid after soft consumer confidence data, albeit inflation expectations continued to rise. The Dollar was flat with outperformance in the Japanese Yen with lower US Treasury yields helping the currency. Aside from the Consumer Confidence data, the Richmond Fed also disappointed. Fed’s Kugler spoke, noting that current Fed policy is still restrictive and judges that policy is well positioned, largely echoing Fed Chair Powell. US President Trump spoke in late trade, with the President noting he has the April 2nd tariffs set, and that he thinks he has been fair on countries who abused the US for many decades. Crude prices settled flat with the soft US data and positive rhetoric from Russia/Ukraine weighing on prices from earlier highs. On the latter, Russia and Ukraine have agreed to a maritime ceasefire and also a ceasefire on energy facilities. U.S. Consumer Confidence fell more than expected in March to 92.9 (exp. 94.0) from the upwardly revised 100.1, marking the fourth consecutive month of deteriorating consumer confidence, hitting a four-year low. For the Present Situation index, it fell 3.6 points to 134.5 as current business conditions were significantly less positive in March; 16.6% said business conditions were “bad” (prev. 14.8%) while 17.7% said “good” (prev. 19.1%). The Expectations Index dropped 9.6 points to 65.2, its lowest level in 12 years, extending its decline below the 80 threshold that typically signals a recession ahead. Driving the Expectations Index lower, worsening occurred in consumers’ outlook for business conditions and the labour market, as well as growing pessimism on future income. Out of the five index components, only the consumers’ assessment of present labour market conditions improved, as 15.7% of consumers said jobs “were hard to get” (prev. 16%) and 33.6% said jobs were plentiful, unchanged from February. Pantheon Macroeconomics noted the resulting net balance saying jobs are plentiful is consistent with a first estimate of private payroll growth of around 125K in March and a slight upside risk to the 4.1% unemployment rate. Meanwhile, Consumers’ perceived likelihood of a US recession over the next 12 months held steady in March. Average 12-month inflation expectations rose again to 6.2% (prev. 5.8%) as consumers remained concerned about high prices for key household staples like eggs and the impact of tariffs. Given the proportion of people expecting fewer jobs to be available in 12 months’ time exceeded those expecting more jobs the joint-largest gap since March 2013, PM added, “the chances that a burst of tariff-driven goods inflation feeds through to CPI services inflation are low”. The Richmond Fed Composite Manufacturing Index fell to -4 in March from 6 in February and was led by a significant decline in the shipments index to -7 from 12. Of its two other component indices, new orders and employment fell to -4 (prev. 0) and -1 (prev. 9), respectively. Elsewhere in the report, local business conditions tumbled to -13 (prev. -5), while the index for future local business conditions considerably dropped to -22 from 2. Ahead, the future indices for shipments and new orders both dipped, to 7 (prev. 13) and 6 (prev. 8). On the inflation footing, prices paid and received both distinctly increased, as did firm’s expectations for the next 12 months. New Home Sales rose by 1.8% in February to 676k, a touch beneath the 679k forecast but it is an improvement after falling 6.9% in January. The prior month was revised up to 664k from 657k. The report showed the median sales price was USD 414,500 with an average sales price of USD 487,100. The estimate of new houses for sale at the end of Feb was 500k, representing a supply of 8.9 months at the current sales rate. Pantheon Macroeconomics notes “Some of the uptick in sales likely reflects more favorable weather, given that January was the coldest since 1988.” Pantheon also reminds us the data is too volatile, too heavily revised, and comes with too wide a margin error to take a single month’s numbers seriously. The report notes that the 1.8% rise comes with a 90% confidence interval of 18.6%. Looking ahead, Pantheon highlights that “Mortgage applications remain weak, while leading indicators such as the current sales index of the NAHB survey, and components of the Michigan and Conference Board consumer surveys suggest demand is waning.” Fed Governor Kugler took a very neutral approach to her speech. She said she sees current Fed policy as still restrictive and judges that policy is well positioned. She echoed Fed Chair Powell’s forecasts that 12-month PCE was 2.5% in February, and also noted that progress on bringing inflation to target has slowed since last summer. She said the return of positive goods inflation is ‘unhelpful’ as it had helped keep a lid on total inflation and inflation expectations. Kugler acknowledged the surveys show consumers are expecting further increases in prices in the near term, with uncertainty tied to trade policy. She is paying close attention to the acceleration of price increases and higher inflation expectations. She noted the latest economic data for early this year have shown some signs of softness (referencing the weak January retail sales, but said it was not entirely unexpected after a strong December print, some bad weather and difficulties in the seasonal adjustment of the data, while retail sales were more mixed in February). She said the labour market appears to be stable through February, noting the unemployment rate is low. Elsewhere, Oil closed 0.42% higher while Gold ended Tuesday’s session with a small 0.3% gain.
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Equities
The S&P 500 closed unchanged at a price of 5767.
The Dow Jones Industrial Average closed 4 points higher for a 0.01% gain at a price of 42,587.
The NASDAQ 100 closed 0.53% higher at a price of 20,287.
The Stoxx Europe 600 Index closed 0.67% higher.
Yesterday, the MSCI Asia Pacific closed 0.5% higher.
Yesterday, the Nikkei closed 0.46% higher at a price of 37,780.
Currencies
The Bloomberg Dollar Spot Index closed 0.05% lower.
The Euro closed 0.1% lower at $1.0788.
The British Pound closed 0.43% lower at 1.2943.
The Japanese Yen rose 0.4% closing at $149.97.
Bonds
Germany’s 10-year yield closed 2 basis points higher at 2.80%.
Britain’s 10-year yield closed 3 basis points higher at 4.76%.
U.S.10 Year Treasury closed 5 basis points lower at 4.30%.
Commodities
West Texas Intermediate crude closed 0.42% higher at $69.29 a barrel.
Gold closed 0.3% higher at $3019.10 an ounce.
This morning on the Economic Front we have German U.K. CPI, PPI and RPI at 7.00 am. This is followed by U.S. MBA Mortgage Applications at 11.00 am, and Durable Goods Orders at 12.30 pm. Next, we have a speech from Fed Member Kashkari at 2.00 pm and the Atlanta Fed GDP Now Q1 Forecast at 3.30 pm. Finally, we have a Five-Year Treasury Auction at 5.00 pm.
Cash S&P 500
Monday’s gap and ramp rally was a move that you were either long over the weekend or were stopped out given the aggressiveness of the rally which was the largest upday in over five weeks. These are the type of situations that can breed the so called pain trade, you are either positioned for it or not and anyone that is not is desperately waiting for a dip to get in, but to the extent a dip is suddenly no longer coming they are left behind and those that stayed short get squeezed along with price and then it keeps feeding on itself. But one day does not a make a pain trade prove itself especially given the number of negative divergences in a short-term overbought market, as it takes multiple consecutive days of this and we are still early in all this despite the fact that the S&P is trading 280 Handles above the March low. The number of tariff headlines are a distraction and we will not know the outcome until next week. Given the backdrop I will not chase the S&P higher as I continue to be a buyer on any dip lower to 5718/5738 with a higher 5699 ‘’Closing Stop’’. I still do not want to be short the S&P at this time. If this view changes, I will be back with a new update for my Platinum Members.
EUR/USD
No Change: I am still flat as the Euro continues to correct some of its March surge higher. The Euro has support below from 1.0670/1.0750 where I will be a small buyer with the same 1.0595 wider ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 1.0820.
Dollar Index
I am still flat the Dollar as the market again fell shy of Tuesday’s buy range. Today, I will continue to be a small buyer on any dip lower to 103.10/103.90 with the same 102.60 ‘’Closing Stop’’.
Russell 2000
Yesterday, the Russell traded in a narrow range and I am still flat. Today, I will again be a buyer on any dip lower to 2000/2070 with the same 1935 ‘Closing Stop’’. If I am taken long, I will have a T/P level at 2120.
Cash FTSE
The FTSE to trade sideways despite the rally in the American Indexes over the past few days and the European Markets on Tuesday. I am still flat the FTSE market as I continue to look to buy the market on any dip lower 8530/8600 with a higher 8465 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 8655. Despite the higher Gilt Yields I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow traded in a narrow range yesterday and I am still flat. Given how short-term overbought the market is at the moment I will not chase the Dow rally higher from here, preferring to wait for a pullback first. Therefore, I will continue to be a buyer on any dip lower to 42050/42300 with the same 41795 ‘’Closing Stop’’. Despite the Dow been short-term overbought I have no interest in selling this market. If I am taken long, I will have a T/P level at 42530.
Cash NASDAQ 100
The NDX was the strongest of Tuesday’s Indexes with the market getting closer to its 200 Day Moving Average which comes in at a price of 20309 this morning. Given how short-term overbought the American Indexes are following Friday/Monday’s surge I will not chase the NDX higher. The NDX has support from 19970/20130. I will now raise my buy level to this area with a higher 19815 tight ‘’Closing Stop’’.
December BUND
The Bund just missed Tuesday’s buy range before having a small rally into the close. I will not chase the Bund higher as I continue to be a buyer on any dip lower to 127.40/128.20 with the same 126.75 ‘’Closing Stop’’. If triggered, I will have a T/P level at 128.90. I still do not want to be short the Bund at this time. If this view changes, I will be back with a new update for my Platinum Members.
Gold Rolling Contract
Gold again traded in a narrow range without ever threatening yesterday’s sell range. Today, I will continue to be a seller on any further rally to 3070/3088 with the same 3111 ‘’Closing Stop’’. I still do not want to be long Gold at this time. If I am taken short, I will have a T/P level at 3053.
Silver Rolling Contract
My latest long 33.10 Silver position worked well as the market rallied to my 33.65 T/P level and I am now flat. As long as Silver does not break and close below $30, I will continue to be a strong buyer on dips. Today, Silver has support below from 32.50/33.20 where I will again be a buyer with the same 30.95 ‘Closing Stop’. If I am taken long, I will have a T/P level at 33.95.
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