A report that President Trump is considering not forcing an opening of Hormuz is putting a minor bid into risky assets this morning.
- Markets are more influenced by the ongoing Middle East war than anything else right now. Although the war continues, a report this morning that President Trump is considering not ordering an operation to try to force open the Strait of Hormuz has put a small bid into generally weak and bearish stock markets. The S&P 500 Index closed at a new 7-month low yesterday after rising strongly and then falling even more strongly at the end of the day. The Index has risen firmly in off-hours trading since this Hormuz report. However, the report is unverified, and it is worth noting that the Trump White House has been leaking pro-market news at strategic moments to try to prop up the stock market and suppress the prices of Crude Oil and Gasoline. It is also worth noting that the flow of American soldiers and equipment into the region continues unabated.
- Gasoline futures reached a new long-term high price yesterday, while WTI Crude Oil futures made a new high close. The price action for both assets looks bullish. As long as the war goes on without an opening of the Strait of Hormuz, the higher these prices are likely to rise, although President Trump might have some temporary success talking these prices down, as he did last week. Most trend traders will be long of energies now. For retail traders, if you do so, it could be wise to use a smaller than usual position size.
- In the Forex market, the British Pound has been the strongest major currency since today's Tokyo open, while the New Zealand Dollar has been the weakest. The USD/JPY currency pair continues its minor bearish retracement. Trend traders will still be long of USD/JPY on the bullish breakout which we saw last week.
- Speculation about the ongoing war in the Middle East continues. Despite the Hormuz report, according to the prediction site Polymarket, the US will likely announce an end to military operations in Iran in May, and a ceasefire agreement is expected in June. This suggests another month of war at least. Polymarket also sees a US ground operation on Iranian territory happening before the end of April. President Trump has been publicly mulling using US troops to seize Kharg or another strategic Iranian island, "taking control of Iran's oil", or seizing Iran's uranium stockpile.
- Gold and Silver are continuing to rise weakly as volatility continues to decline in precious metals. I think Gold will face overhead resistance relatively close by at about $4,600.
- Bonds and yields are continuing to rise globally as markets see the likely impact of the Middle East war as an inflationary shock which will require generally elevated levels of interest rates.
- There will be two high-impact data releases today:
- US JOLTS Job Openings
- Canadian GDP