evening wrap, may 8
market vibes
May 8…)
still having issues with publication… reposting…
If I hadn’t tuned into Trump’s headline announcement with the Brits this morning, I would not have known it was VE Day. I did know when my father was alive, but I had forgotten because America has Memorial Day. So, now that I have been reminded, I’ve added a few clips at the bottom of the wrap in honor of the 80 million men, women, and children who died rather than bend the knee to a madman.
In the markets
ConocoPhillips became the latest U.S. oil explorer to cut spending after a drop in crude prices below $60 a barrel this year. Diamondback said the same thing yesterday. Crude rallied in London and accelerated higher in NY when the Conoco statement was posted on the wires until 11:00 AM when London closes and the buyers stopped buying.
Although we have seen two sharp rallies in prices this week, WTI open interest and volumes have been subdued. In a nutshell, these prominent companies are warning production in the Permian will go down as prices fall. However…prices are falling because Saudi, Russian, and other OPEC+ producers are transparently increasing production by 2.2 mmbpd by November.
Based on the most recent data from the International Energy Agency (IEA) and other sources, OPEC’s total spare crude oil production capacity as of early 2025 is estimated at 5.3 million barrels per day (bpd), a level OPEC can produce within 30 to 60 days and sustain for a few months. Any decline in production in the US be replaced by OPEC and Canada., happily. Foisting a rally with these warnings will backfire, I think.
Technically, WTI continues to develop horizontally below a multi-year support area at $62/barrel, basis continuous roll-adjusted data.
DXY has formed a bottom and rallied into the void created in early April when U.S. assets were liquidated at any price possible to meet margin calls.
The dollar has been falling ever since stocks broke on February 20th. While S&Ps rallied 1000 handles for a month, DXY traded horizontally below 100 until today.
Is this the foreign buyer returning to the U.S. as tariff deals progress? Judging by the warmth of contentment on both sides of the pond in the Oval this morning, that could very well be the case.
June gold fell $100 today at the the lows on high volume in a $130.00 range. I noted the date April 16 because it’s important for the compression profile (next chart below).
This is a 15 day compression profile of the period April 16 (chart above) to May 8. As you can see, the most actively traded price in the sample is $3310, or POC, which is exactly where gold is now (red dot). If the dollar continues to rally, gold will dig into the $3200 handle where we were trading before the TWD rally earlier this week.
This is a 30 day compression profile. It’s going to take a strong rally in the dollar to get back to the low $3200s, but this has been a very positive week for the administration and Bessent is meeting with China on Saturday… and China is gold.
Any trade with a stop is a good trade.
“Stocks rise as Trump says “buy” before China talks.”I wonder if he knows something? lol.
If it were not for this one-bar false positive in NDX and the frothy UK tariff deal, I’d still be suspicious of stocks, although I did trade both sides of S&Ps today and made money being long, which is an effective curative for a bear.
However, volume was lower today than yesterday, but the mood was far more bullish with the FOMC behind us, plus USD rallying, gold falling, etc. I’ll stay flat. It’s awfully late in the game to get long with the 200 DMA an underhand stone’s toss away.
I think I’m going to call bitcoin The Great Gatsby. Seriously!
In other markets, an improving trade outlook got the blame for higher yields in fixed, characterized by this headline: “Treasuries Slide as Trump Pushes Investors Toward Riskier Assets.” As if anyone actually trades on what Trump says, especially not Bloomberg! Perhaps we should.
my vibe
Sentiment has changed dramatically in a single day. Happy talk and tariffs, great expectations for progress with China this weekend; the mood in general has flipped from grim to better. Day-by-day changes become money.
As I said earlier about stocks, the best thing you can do if you’re in a rut trading one side of the market and losing is try the other side!
One more … once upon a time.
**PS: if any readers are unfamiliar with Market profile analysis please feel free to message me and I’ll send you a tutorial…
PPS: my apologies for the late publications lately but for some reason substack has been having (high traffic??) issues and the platform simply freezes for hours…
Night all… good luck in Asia.
JJ
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Charts and data CQG and Bloomberg
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Thank you for offering a tutorial on market anaylsis please, and Thanks!
Likewise, very interested in the tutorial.