As one quarter ends, another begins.
This one obviously has the "Spectre" of "Liberation Day" hanging over it. The truth is, as we know, nothing will be decisively resolved in terms of this financial and economic certainty tomorrow so markets likely remain on edge.
What are we watching across markets?
Equity Markets
The SPX, SOX and NDX all posted bearish outside quarters yesterday. That is the first time that has happened in the SPX since Q1, 2020 (35% fall). the first time EVER on the SOX (back to 1994) and the first time on the NDX since Q3, 2018 (23% fall)
As noted in previous pieces it is unlikely the magnitude of this move unless and until the SPX heads towards bear market territory (4,918) is going to shift the Fed from its stubborn "Sit On hands" stance. For that to happen we will likely need a significant softening in the Employment picture. It is worth watching JOLTS today for any guidance in that respect
On ESA the double top target remains around 5,500 which looks to be a minimum target but even lower levels on the back of the reversals above look likely.
Last week the SPX had both a bearish outside week as well as a close below the 55-week MA as did the NDX.
All 3 indices are now below the 55-week MA on a weekly closing basis with the 200-week MA's a lot lower (SPX 4,677, SOX 3,785, NDX 15,730)
Rates
The direction in yields still looks down to me. The US 2-year yield looks set for a move towards 3.74-3.77% with the 76.4% pullback area at 3.71%. First support is at the recent low at 3.825%
The US 5-year yield has a clear double top target of 3.78% with the recent lows at 3.878% and the 76.4% pullback at 3.67%
The US 10-year yield is targeting 3.92-3.95% with the 76.4% level at 3.88%. The recent low is at 4.104%
With the Fed remaining intransigent I still think the danger is that the 2's 5's curve inverts possibly even towards minus 12 with big alarm bells if we get to the minus 15 to minus 25 bp range
The 2's 10's curve has turned off the 76.4% pullback level at 37 bp's and looks in danger of heading towards the 76.4% pivot at 16 bp's
Commodities
Oil continues to maintain its bid tone and CL1 hit its $71.25 to 71.50 target overnight. What now?
When WTI bounced from exactly the same level in Sept last year it continued the rally to a peak of $72.49 before moving materially lower. The downward sloping 200-day MA stands at $72.78. So, a move towards the $72.50 area still looks a danger.
This is not a demand driven move, so it has negative feedback implications on risk. In that respect the $72.50-$73.00 area should be hard to overcome.
HGA has a very bearish inverted hammer last week and looks set for further losses. First good support is $488.50 and then $477.10
Gold continues to push higher with a good resistance level hard to find before $3,275
FX
FX remains complicated as it is a relative value rather than directional trade.
While currencies like the CAD and MXN are clearly under pressure JPY tends to benefit from risk off and at this point is less in focus on the tariff issue.
At the same time Europe is front and center in tariffs, is very export focused, has little or no economic growth at present and has an ECB talking about pausing.
That does not sound like a good recipe to me, and I suspect that the 1.0690-1.0700 support area still gets tested. A break below, if seen, would increase the danger of a more bearish picture.
As a consequence, I am still biased towards lower JPY crosses.