Wkly Futures Mkt Summary Apr 15.24

BONDS:

The treasury markets were deserving of a short covering bounce to end the trading week last Friday, even if the longer-term trend remains firmly in favor of the bear camp. We suspect growing anxiety from US equity market losses, the dramatic escalation of Middle East fear, rekindled economic concerns toward China and the unrelenting gains in gold are beginning to prompt bargain hunting buying of treasuries. While treasury bonds have initially managed to respect last week’s quasi double low starting at 114-31, the charts suggest lower lows are ahead. . In a minimally supportive US Treasury development, the European Central Bank is thought to be poised to cut interest rates three times before the end of this year with some analysts suggesting the ECB wants to display independence from the US Fed suggesting they will cut before the US.

CURRENCIES:

With last week’s aggressive three-day rally in the dollar of more than 200 points, the bull case toward the dollar might be temporarily overstated. However, the US March inflation report cycle clearly indicated US inflation is not coming down as much as hoped for at the Fed. Furthermore, a historic runup in gold and an uneasy feeling throughout the markets of something bad ahead is likely to keep the dollar firm from flight to quality buying. While the euro has not forged a lower low in the early trade this week, the currency remains severely damaged on its charts and is undermined further by signs of softening economy. While the Pound charts are injured, seeing the country attempt to solidify laws on asylum could help underpin the UK currency. While a major jump in trading volume on last Friday’s spike down move could suggest bargain hunting interest in the Canadian dollar surfaced at last week’s low.

STOCKS:

In retrospect, the equity markets saw a very bearish week of headlines last week with the most prominent bearish development yet another pushing back of US interest rate cut timing. Adding to investor anxiety is a significant jump in US interest rates, unending negative Boeing headlines somewhat disappointing bank sector earnings. However, the market’s recent slide has not produced high anxiety levels and therefore the markets probably have not exhausted selling interest yet. Over the weekend, Iran launched an attack on Israel using drones and missiles, virtually all of which were shot down by Israeli, US, and UK defense weapons. Global equity markets at the start of this week were generally higher with markets tracking positive barely outnumbering those trading lower. Clearly, the Dow has shown the most vulnerability to the disappointment over the slide in US central bank rate cut hope. As opposed to the Dow, the NASDAQ has held up the best of the actively traded stock index futures markets.

GOLD & SILVER:

In addition to the major swing higher at the end of last week exaggerating the overbought conditions of gold and silver, the trade will likely have to contend with a surging US dollar, which is nearing the highest level in 5 1/2 months. Fortunately for the bull camp, US interest rates fell back slightly on Friday with traders thinking the upward track in interest rates will now abate. However, the Iranian drone attack directly against Israel is clearly an expansion of the fighting and could mean a country fighting a country instead of a country fighting a terrorist group!

In a slightly negative development, gold ETF holdings last week saw outflow of 481,361 ounces while silver ETF holdings declined by 9.5 million ounces. According to Goldman Sachs, the gold market is now an “Unshakeable bull market” likely to extend because of emerging market central bank buying, rising Asian retail investment and escalating US political uncertainty into the election. Therefore, gold and silver look as if they are in a flight to quality environment again but given severe outside market headwinds in the extreme ($ and Rates), and severe overbought technical signals, daily trading ranges could now become extreme.

COPPER:

While the May copper contract forged a significantly higher high upward thrust early this week, as of this writing the market is trading nearly $0.11 under its early high! A portion of the sharp rally in copper prices could be the result of various copper exchanges, and government entities pushing to enforce a ban on Russian copper supply flow into the LME as that could obviously pinch world supply. However, reports are that China is already purchasing disguised copper from Russia to avoid sanctions designed to punish Russia. A fresh bullish headline from early this week came from Citgroup who upwardly revised their copper price forecasts for the second and third quarters.

ENERGY COMPLEX:

The energy markets’ lack of significant upside extension following the weekend Iranian drone attack of Israel is disappointing to the bull camp. Like several other physical commodity markets, the crude oil market ranged sharply higher early Friday and promptly fell back $2.00 from the early high in a fashion suggesting the markets may have over factored Iranian retaliation. However, with Iran launching direct drone attacks on Israel, one could consider the war has expanded as feared. On the other hand, the Iranians seem to suggest their retaliation was justified by the attack of their personnel in Syria and seemed to indicate the matter should now be settled as they have avenged the deaths of Iranian military officers in Syria. Unfortunately, Israel is unlikely to allow the direct attacks go unpunished. While Chinese January through March crude oil imports gained 0.7%, the trade was probably expecting larger imports.

At times last week, the gasoline market was the strongest petroleum market but with the significant range up reversal last Friday (July gasoline closed more than four cents below its high) combined with an inflated net spec and fund long positioning that leaves the RBOB market vulnerable to start the new trading week. With the June natural gas contract posting a nine-day low on Friday, the market could be poised to retest contract lows at $1.928.