1. Iran Ceasefire Extended — But The Strait of Hormuz Is Still Basically Shut
Trump extended the ceasefire with Iran, pointing to a “seriously fractured” Tehran leadership and saying he’s waiting for a “unified proposal.”
That sounds like a stall.
As I write this, Brent crude is trading around $100, and WTI is at $91 — war premium is coming back?
But here’s what isn’t getting enough attention: the Strait of Hormuz still has barely any traffic. Very few ships have passed through in the last 24 hours. Again, we are talking 20% of global energy, plus lots of fertilizers pass through there too. The crisis doesn’t have to be “here,” but this has potential to break “other,” places and contagion is a thing.
2. Gold Around $4,750 — Keep Your Eyes Open
Gold is up around 1% this morning, trading near $4,745/oz. Great? This is happening as oil is pointing up. So, let’s see how it plays through the day. Keep in mind, that 50-day moving average is acting like a very strong resistance for the metal.
There is a lot of good news about Silver out there, but the gray metal has been choppy at best. Yesterday, it closed below its 50-day moving average too.
If you are watching these metals, keep your eyes open.
A combination of things are at play here: the Iran situation is far from settled, the DXY (U.S. dollar index) is sitting around 98.35 — dollar weakness is gold’s best friend, markets are pricing in a Fed that’s stuck, and there’s correlation with oil here too.
Caution is required here.
3. S&P 500 – Gaps Unchecked, Optimism, & Concentration
If you have been looking at the S&P 500 at all-time highs and going, “what is going on?!” you aren’t really alone. With some slowing in the economy, global uncertainties, high oil price, sticky inflation, and higher rates, stocks are holding very well. Counterintuitive one could say…but that’s how market does things a lot of times.
Optimism is now starting to kick in, and a lot of “nothing wrong,” mentality is kicking in. We are seeing the move up being defended. Plus, meme stocks catching a bid.
But, dig deeper and you find that equal weight S&P 500 is having hard time pushing past all time highs. This tells there’s concentration, and few names are sending the index higher. Not everything was bought in this rally.
Also, there are bunch of gaps that have gone unchecked essentially. Past few years, gaps on the S&P 500 have been filling very well. There’s a giant gap between April 7 and 8th.
4. Space stocks
If you have been following the SpaceX IPO, then you know some space stocks are getting really hot these days. (Not really an expert in space, but just run a screener with companies that include “space,” in their name, and look at their performance.)
Just some word of caution here more than anything else…
A lot of times, you get buy the rumor and sell the news. Space stocks on SpaceX IPO actually could become sell the news sort of thing.
Stops could be critical here, and obviously the allocation.
5. Canadian Housing — The Slow Bleed Is On Schedule For Now
The average Canadian home price is down compared to the same period a year ago. Also, national/headline numbers are really hiding the real pain of the bubblish areas.
Canadian housing market is anemic, and especially the big cities for now. Demand is just not there, and when it comes back is anyone’s guess. Buyers are waiting for price to drop more, and sellers aren’t just selling. This could continue to create a stalemate.
Condo world, especially in Toronto area, is in world of hurt.
But usually when news is all bad, it’s generally a great time to look for opportunities. A lot of renewals have likely taken place already, and rates in Canada could potentially come down 50bps (there’s a case for it). There’s some light at the end of the tunnel (for below million freeholds), but don’t for a second think 2020-2022 style madness is coming back anytime soon