JAPAN DATA: Offshore Surge Into Stocks Continues, March Outflows Reversed

The S&P(ESM6) range overnight was 6483.50 - 6748.00, SPX closed +1.15%, Asia is currently trading around 6600. The S&P(ESM6) looked to be challenging the pivotal 6500 area when Trump’s comments saw an almost 4% surge higher in under 15 minutes. The timing of the comments was auspicious to say the least as risk looked about to crack and roll over in multiple asset classes. Oil(WTI) through $100, the USD(BBDXY) through 1215-1217 and NASDAQ below 24000, every one of them held and had significant reversals pushing the time line for any breaks further out. It was the first time we started seeing some actual distress in markets with Gold & Silver leading. The market will be looking for some details now on this potential off-ramp but it's the second time the market has had huge reversals on the back of a potential cessation to hostilities. This morning US futures opened slightly lower, E-minis(S&P) -0.10%%, NQZ5 -0.10%. On the day, the first resistance is back toward 6750-6800 and then 6900. The pace and ferocity of that move would have caught any shorts badly, but until I see a clear path for an off-ramp I would still be skewed toward fading rallies as the uncertainty for markets remains and Trump’s ability to talk the market up will fade unless he can show how this end to the conflict is to be achieved.

• Neil Sethi on X: “DB: Discretionary investors have now cut exposure to the lowest in 9 months, to levels last seen around the Iran bombing in June last year. Systematic strategies positioning also dropped to neutral (0.0sd, 40th percentile).”
• The Kobeissi Letter on X: “Turkey has been talking to Iranian officials and President Trump’s envoy Steve Witkoff in an attempt to secure a "brief ceasefire" for peace deal negotiations, per FT.”
• Bloomberg - "Apollo Caps Private Credit Fund Withdrawals As Requests Hit 11%.”
• The S&P 500 Index Average True Range(ATR) for the last 10 Trading days:  107 Points

Fig 1: S&P 500 Index Weekly Chart

Source: MNI - Market News/Bloomberg Finance L.P

Headlines have crossed from the WSJ that Gulf States, including Saudi Arabia, are considering joining attacks against Iran, see this link. It notes: "U.S. allies in the Persian Gulf are inching toward joining the fight against Iran, getting tougher following persistent attacks that have disrupted their economies and risk giving Tehran long-term leverage over the Strait of Hormuz." Adding, in relation to Saudi Arabia: "Crown Prince Mohammed bin Salman is now eager to re-establish deterrence and is close to a decision to join the attacks, the people said. It is only a matter of time before the kingdom enters the war, one of the people said." 

• Oil prices have firmed a little as these headlines crossed. WTI is back above $90/bbl, up around +2.3% for the session (we opened up at $88.78/bbl)/ Brent crude is up around 1.6% to $101.50/bbl. We remain well off Monday highs though.
• US equity futures are softer, but up from session lows. The USD is higher against all the majors, with AUD and NZD down around 0.30%.
• Also impacting sentiment was earlier headlines from Iran around energy infrastructure assets being struck is also likely aiding firmer oil prices. Via BBG: "A gas pressure-regulation station and an associated administrative building were targeted in Iran’s central Isfahan province in recent US–Israeli attacks, the semi-official Fars news agency reports." 

The range overnight for gold was $4,099.17/oz - $4,512.76/oz, Asia is currently trading around $4420, +0.30%. After capitulating down around 9% at one point, demand returned toward the $4100 area, then Trump's comments saw it recoup most of those losses. That was a huge reversal, but an 18% collapse in 4 days probably pointed to most weak hands being squeezed out and starts looking like adding value again back toward $4000. The price action tells you the market had been caught wrong-footed but the retracement looked stretched. I suspect rallies back toward $4600-$4800 runs into sellers initially as those that held back use the bounce to pare back positioning. But I do think dips back toward $3800-$4100 will continue to see demand now and we will probably do some work in a choppy range as the market tries to find a base after this ugly washout.

• Otavio Costa on X: “Seeing a narrative going around that gold is selling off because everyone is getting liquidated. Please. If that were the case, people would be selling stocks first. Gold is leading the downside. To me, this still looks like a market pricing in an extremely tight monetary policy to deal with a reacceleration of inflation. I really struggle with that view. This is not the 1970s. Back then, the Fed had room to act. Debt levels were low, and rates could be pushed into double digits without immediately destabilizing the system. Today couldn’t look more different.” See Fig.1 below.
• The XAU Average True Range(ATR) for the last 10 Trading days: $208.19/oz

Fig 1 : US Debt to GDP

Source: MNI - Market News/@TaviCosta