MAD Macro - The Tin Man And The Scarecrow
Listen Tin Man, We Need To Cut Spending
The Tin Man and the Scarecrow met again yesterday in an effort to restart the debt ceiling talks. Again, there were some positive comments following the meeting but an agreement seems difficult. The markets seem to believe that they will reach an agreement, although one year T-bill yields made new highs. All along, it has seemed crazy that they can’t agree to cut a little spending. After all, spending and the deficit are growing much faster than expected just 6 months ago. Anyway, the Tin Man needs a little oil and the Scarecrow needs a brain.
The WSJ has a fun article today, linked here, about the Bitcoin Conference in Miami. There was a “No Bears Allowed” sign at the entrance to the conference, so attendance was a little lower this year. Additionally, no SBF (Scam Bankman Fraud) to throw fun parties with customer money. The highlight was a standing room only speech by Robert F. Kennedy Jr. Here is the YouTube link. The Tin Man should oil up and start running because Kennedy is polling at 20%. Next year’s election is getting interesting but the risk of the Orange Monster vs the Tin Man remains the likely outcome, which is very sad. Kennedy’s voice is a little unusual but he is an interesting character. I don’t think Kennedy can win the Democratic nomination but Kennedy vs the Orange Monster would get some high TV ratings.
Markets have been trading in very narrow trading ranges the last few days as investors watch the debt ceiling talk developments. We get an early reading on May economic activity with the preliminary May PMI manufacturing and service numbers. S&P and NASDAQ futures are due a little lower. The U.S. dollar and interest rates are higher. I am guessing that until we get a resolution to the debt ceiling talks, markets will remain range bound.
I updated the U.S. dollar index, U.S. dollar index weekly, U.S. 2yr yield, spot gold, spot gold weekly, bitcoin, S&P futures and NASDAQ 100 futures charts below.
The U.S. dollar is a little stronger today and continues to trade in the 103.00 to 103.80 resistance area. I included the long-term weekly chart highlighting the 2017 and 2020 dollar highs, which are the resistance levels.
The U.S. 2yr yield is a little higher this morning. I have highlighted a possible bearish Elliott wave count on the chart. We would need a very hard landing for the economy for 2yr yields to fall to 3%, but you never know.
Spot gold is a little lower today. I am bullish but a close below the $1,950 level would make me question the near term bullish outlook. I included the long-term weekly chart to highlight why the $1,950 level is important. I believe the long-term chart formed a bull flag formation and $1,950 was the breakout level. I would like to see the market hold this level on any pullback.
Bitcoin has traded in a very narrow trading range and is holding the 100 day support and the trend line support on the chart.
S&P and NASDAQ 100 futures are slightly lower today. The S&P futures are still trading near the 4200 resistance level. The S&P has made new highs for the year but has not clearly broken out above the trading range highs.
IMPORTANT DISCLOSURES AND DEFINITIONS
Unless otherwise stated, Bloomberg is the source of all data and charts.
S&P 500 futures are a type of derivative contract that provides a buyer with an investment priced based on the expectation of the S&P 500 Index’s future value. Nasdaq 100 futures are commodities futures products traded within the equity futures sector. West Texas Intermediate (WTI) oil is a benchmark used by oil markets, representing oil produced in the U.S. Brent Crude Oil is a blend of crude oil recovered from the North Sea in the early 1960s, whose price is used as a benchmark for the commodity's prices. The U.S. dollar index (USDX) is a measure of the value of the U.S. dollar relative to the value of a basket of currencies of the majority of the U.S.'s most significant trading partners. UBS Bloomberg Constant Maturity Commodity Index is a total return rules-based composite benchmark index diversified across commodity components from within specific sectors.
The information herein represents the opinion of the author(s), an employee of the advisor, but not necessarily those of VanEck. The securities/ financial instruments discussed in this material may not be appropriate for all investors. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
This material has been prepared for informational purposes only and is not an offer to buy or sell or a solicitation of any offer to buy or sell any security/financial instrument, or to participate in any trading strategy.
Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data.
All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future performance.