“The most important rule of trading is to play great defense, not great offense.”
Paul Tudor Jones
EQUITY MARKETS – INDICES
Well, there’s the decline, some of it at least.
It’s all AI trade now, that’s no secret. So, what will happen now when we have both OpenAI and Anthropic CEOs calling for a slowdown?
Is it another wave of marketing, are these financial constraints, or less likely but possible, genuine worry about the capabilities of the frontline models? I’m certainly no expert, I just know the math isn’t mathing, at least not now.
Some are calling for markets to dive soon, well, that can certainly happen. This news is coming right into the weak seasonal window, buyback blackout and all. But what if hyperscalers rally, after all, they may have been providedan easy exit now, and could escape the mad capex race.
Is this all part of the setup that we described last week? May be. Welcome some decline, just enough to flip as many as possible short, the managed money, the CTAs, the vol and trend funds, and then rug pull them, flip everything back to the upside. So the real question is whether they can pull it off ..
Myself, I still don’t assume they can manage the tape forever. It’s the government after all, my friends, no strangers to mistakes or outright failure. So I lean, as I did last week, toward this being able to tip into a real period of volatility, with quarter-end OpEx, and then the elections not far behind.
Asian markets will open first, and there, the AI trade is still the major engine. Taiwan and South Korea the ones to watch, Japan as well of course.
On the government’s side the general outlook doesn’t change. They are spending like there’s no tomorrow: social transfers, defense, energy, you name it, maybe they’ll have to pick up the tab for private sector spending now as well. So, will the global AI race stay on, funded by an unbelievable amount of debt, or will we take a pause ..
I don’t know how, when, or if it ends. It really depends on the money creation, and it just never seems to stop, reinforcing the K-shaped economy, globally. Cycles point to a late phase, yields climbing, equities topping, commodities doing well, but we’ll see, and follow the trends, as always.
SHORT-TERM TREND CHANGES SINCE LAST WEEK
• S&P 500 – UNITED STATES: uptrend ➝ sideways
• DOW JONES – UNITED STATES: uptrend ➝ downtrend
• MSCI EAFE – DEVELOPED MARKETS: uptrend ➝ downtrend
• NIKKEI YEN – JAPAN: sideways ➝ downtrend
• DAX – GERMANY: sideways ➝ downtrend
• FTSE 100 – UNITED KINGDOM: sideways ➝ downtrend
• HSI HANG SENG – CHINA: sideways ➝ downtrend
MEDIUM-TERM TREND CHANGES SINCE LAST WEEK
• HSI HANG SENG – CHINA: uptrend ➝ sideways
COT CHANGES SINCE LAST WEEK
• RUSSELL 2000 – UNITED STATES: negative ➝ neutral
• MSCI EAFE – DEVELOPED MARKETS: neutral ➝ negative
• NIKKEI YEN – JAPAN: neutral ➝ negative
FOREX
The dollar had it all lined up to finally rally: hawkish Fed speak, rate hikes being priced in, yields rallying both short and long end, oil ripping .. and even with all of that, it just couldn’t get a serious bid. This is the one piece that doesn’t fit; we’ll see, of course, but for now it remains in downtrend.
And gold, it cooled off short-term, back to sideways. Absolutely no FOMO out there, which is exactly what we want: wall of worry. We’re well positioned already, so we’re just waiting and watching now, looking to trade more strategically, only as opportunities present themselves.
SHORT-TERM TREND CHANGES SINCE LAST WEEK
• EUR/USD – EURO: uptrend ➝ sideways
• CHF/USD – SWISS FRANC: sideways ➝ downtrend
• CAD/USD – CANADIAN DOLLAR: uptrend ➝ sideways
• NZD/USD – NEW ZEALAND DOLLAR: sideways ➝ downtrend
• ZAR/USD – SOUTH AFRICAN RAND: uptrend ➝ sideways
• AU/USD – GOLD: uptrend ➝ sideways
• BTC/USD – BITCOIN: uptrend ➝ sideways
• INR/USD – INDIAN RUPEE: uptrend ➝ sideways
• RUB/USD – RUSSIAN RUBLE: downtrend ➝ sideways
• SEK/USD – SWEDISH KRONA: sideways ➝ downtrend
MEDIUM-TERM TREND CHANGES SINCE LAST WEEK
• DXY – US DOLLAR INDEX: sideways ➝ downtrend
• EUR/USD – EURO: sideways ➝ uptrend
• JPY/USD – JAPANESE YEN: sideways ➝ uptrend
• CAD/USD – CANADIAN DOLLAR: sideways ➝ uptrend
• NZD/USD – NEW ZEALAND DOLLAR: uptrend ➝ sideways
• BTC/USD – BITCOIN: sideways ➝ uptrend
• INR/USD – INDIAN RUPEE: sideways ➝ downtrend
• PLN/USD – POLISH ZLOTY: sideways ➝ downtrend
• SEK/USD – SWEDISH KRONA: sideways ➝ downtrend
COT CHANGES SINCE LAST WEEK
• CAD/USD – CANADIAN DOLLAR: positive ➝ neutral
INDUSTRIAL METALS
It giveth and it taketh.
Copper, gold, silver, platinum, aluminum, all pausing in the short term. So where do we go from here? More sideways, or further correction?
The answer is largely political and depends on the energy crisis. Oil, gasoline, diesel: at these levels, they’re putting a lot of economies in recession and many households at financial stress.
Of course, they can choose to subsidize consumption, cut fuel taxes, but it’ll only be a temporary relief.
Or they can choose to end the wars. All answers are political now.
Copper tariffs rug pull has arrived. There’s still no decision, but we had a no-decision comment, so the markets are betting that they will not implement a 15% duty on imported copper.
Much of that excess in price has been wiped out, almost immediately. Now we can slowly go back to the base case, which is that we don’t have nearly enough. And with the energy prices where they are, production costs and issues could only intensify. And of course, the AI trade, of which copper is a part of, if it ends, then we’ll see almost everything enter a weak period.
Physical uranium keeps its place in both uptrends, unbothered by all the chop, right on time as the seasonal strength does its work. Equities are a different story, again, part of the AI trade to large extent.
Otherwise, as always, we do have our strong fundamental cases that will most probably play out, but in the short term we stay flexible, keep what is working and cut what is not, early, just riding the waves.
SHORT-TERM TREND CHANGES SINCE LAST WEEK
• SILVER – UNITED STATES: uptrend ➝ sideways
• COPPER – UNITED STATES: uptrend ➝ sideways
• PLATINUM – UNITED STATES: uptrend ➝ sideways
• PALLADIUM – UNITED STATES: uptrend ➝ sideways
• COBALT – UNITED STATES: downtrend ➝ sideways
• LITHIUM CARBONATE – CHINA: uptrend ➝ downtrend
MEDIUM-TERM TREND CHANGES SINCE LAST WEEK
• SILVER – UNITED STATES: sideways ➝ downtrend
• ALUMINUM – UNITED STATES: sideways ➝ uptrend
• COBALT – UNITED STATES: downtrend ➝ sideways
• LITHIUM CARBONATE – CHINA: sideways ➝ downtrend
COT CHANGES SINCE LAST WEEK
• SILVER – UNITED STATES: positive ➝ neutral
• PALLADIUM – UNITED STATES: positive ➝ neutral
ENERGIES
Diesel hitting all-time highs, Brent and WTI up, gasoline still way elevated.
Still, the short-term direction remains dependent on the political decisions, same as every week since the war started. The Middle East, Houthis & Saudia now, still Russia, I won’t pretend to know what they’ll do next, but it doesn’t look like it’ll be over anytime soon.
What we can do is stick to facts. The damage to production capacity and the depletion of reserves is done, and it’ll be with us for years, likely extending right into what would anyway be an underinvestment crisis, the one set to bite by the end of this decade.
Easy money has been made, but there are a lot of opportunities here for patient and strategic investors, upstream, midstream, downstream, services, you name it, and we’re ready for it. Our core long-term energy equity positions stay on.
SHORT-TERM TREND CHANGES SINCE LAST WEEK
• NATURAL GAS – UNITED STATES: uptrend ➝ sideways
MEDIUM-TERM TREND CHANGES SINCE LAST WEEK
• NONE
COT CHANGES SINCE LAST WEEK
• CRUDE OIL – UNITED STATES: positive ➝ neutral
• NATURAL GAS – UNITED STATES: positive ➝ neutral
TREASURIES
Beatings will continue until morale improves. Nothing changed on the board; the whole curve still in a downtrend, yields parked up at the new highs.
The Fed meeting is now right in front of us; markets are pricing a hike, but really, the rate decision is still anyone’s guess now. I still think they’ve succeeded at removing the forward guidance for a reason. At the same time, they have also removed the reaction function, but that was probably the point all along as well.
We still won’t know what data to trust; it’s produced by the government. And we still don’t know which data to look at; it’s up to task forces what they’ll use. We won’t know what the inflation measure they’re looking at is; it’s up to task forces. And the balance sheet plan, you guessed it, is up to task forces.
In any case, the long end is still heading the wrong way, and it’ll take a lot more than words, cosmetic buybacks, or a small hike to change that. Nothing structural has changed; more deficits, more issuance, more money supply. We still take no longs here.
SHORT-TERM TREND CHANGES SINCE LAST WEEK
• NONE
MEDIUM-TERM TREND CHANGES SINCE LAST WEEK
• NONE
COT CHANGES SINCE LAST WEEK
• NONE
AGRICULTURE
The softs took their turn to consolidate last week; the grain held firm.
Same as always, sharp moves to new highs then violent pullbacks to higher lows; it’s just how they advance. Two ways to play it: swing the individual commodities short-term, or hold long-term and take the good with the bad of the bull run. Both depend on the trader’s psychology.
The bigger picture stays the same, and it points up. The fertilizer and energy damage is done, and El Niño is still out there. We stay long where the trends hold, and let the prices move as far as necessary to incentivize production.
The crush spread setup we’ve got our eye on is right here, still building, though it may only really move into 2027. We’ll see. Patience is key.
And on fertilizer equities, they typically move well into an ags bull market. Farmers need the money to buy them, so they need to sell their production at high prices into the future.
Right now they’re struggling; fuel prices through the roof, and it’s usually right here that governments step in: subsidies, tax breaks; that’s the tell; it’s where the fertilizer cycle begins.
SHORT-TERM TREND CHANGES SINCE LAST WEEK
• ORANGE JUICE – UNITED STATES: uptrend ➝ sideways
• COCOA – UNITED STATES: uptrend ➝ sideways
• CATTLE – UNITED STATES: downtrend ➝ sideways
• LEAN HOGS – UNITED STATES: sideways ➝ downtrend
MEDIUM-TERM TREND CHANGES SINCE LAST WEEK
• NONE
COT CHANGES SINCE LAST WEEK
• NONE
That’s it for now. Stay safe out there!
Kacper Piotr Kaminski, Cerlogic Markets Research – intel.cerlogic.com
This publication is for informational and educational purposes only and does not constitute investment advice. Markets involve risk, and every participant is responsible for their own decisions.