00:00When I look at the S&P 500, I see a broken chart. It's below the 50. It's below the
00:04200 day. Technicals are a big problem as we walk into a new week with so much news.
00:10What's going to drive this? Fundamentals or technicals as we try to figure out the next leg. Thanks for having
00:14me, guys. Yes, I think now it's mainly a story driven by technicals.
00:19So, for example, it is important to take a look what happened last week. Every week since the beginning of
00:24the war, stocks traded at a very, you know, simple pattern.
00:28And stocks were up Monday to Wednesday every single week. And they were down Thursday and Friday by about 9
00:34percent on average every week up until the last one.
00:37It just tells us that investors did not want to hold positions going into the weekend. So they wanted to
00:43de-risk portfolios.
00:44Now, last week we saw a huge jump in stocks. But of course, that happened after we got a headline
00:51saying that Iran is working with Oman to kind of, you know, manage the Strait of Hormuz.
00:58We saw that the S&P 500 rose 3.4 percent. That's the best performance since late November.
01:04But it is really important, guys, to take a look at technicals and positioning because going into this last week,
01:10we saw that hedge funds accumulated a huge amount of short positions on the S&P 500 just to prevent
01:17themselves from bigger losses.
01:18And then when we see that stocks are moving up, they have to cover those short positions. So this is
01:23a kind of short squeeze rally.
01:25And also, again, going back to fundamentals, I want to quote data from Matt Malley. He posted a nice note
01:32yesterday.
01:33He said when history tells us that when oil prices jumped by 60 percent and stayed at this level for
01:40several weeks, it always leads to a decline of at least 20 percent in the S&P 500.
01:47So maybe we are really far from this like big rally.
01:50Well, and speaking of oil prices, we've got this OPEC meeting going on.
01:55Story in the terminal, OPEC members are planning to raise production quotas for May.
01:59This is, of course, a symbolic move as this conflict continues in the Middle East, and they're still trying to
02:03get those shipments through.
02:04We have seen a couple more go through.
02:07Iraqi oil tankers were allowed to go through today, but obviously it's not making a big enough difference.
02:12Oil prices, of course, climbing to almost $120 a barrel last month, and Brent futures are settling near $109 on
02:20Friday.
02:21That was after President Trump avowed kind of an escalation in the war, which we've also been talking about.
02:26Yeah, triple digits for Brent, for WTI.
02:29You talk about quotas.
02:31That's different than pumping.
02:32This is a symbolic move that will not actually result in more oil, right?
02:35Exactly.
02:35So we see these headlines again, like according to people familiar with the matter, that it would lead to increase
02:41about 106,000 barrels.
02:43It's just a drop in the bucket.
02:44But also we have to keep in mind that it's not just about production.
02:47It's about supply chains and transportation.
02:49So the market is still very, very tight.
02:52And as a result, of course, consumers feel that.
02:56Yeah, so next week we start to have a lot of data coming out.
02:59It's a double.
03:00We have CPI, we have PCE, we have Fed minutes coming out.
03:02I mean, so much is going to be coming out.
03:04What are you keeping more of a closer eye on?
03:06Is it the CPI?
03:07Is it PCE?
03:09I would say, like, all of the above.
03:11So, for example, when we look at CPI numbers and projections, economists expect that monthly CPI, month-over-month data,
03:18would result in a 1% increase.
03:21And that's a big deal.
03:22It's a huge one, yes.
03:23So I saw data from Wells Fargo economists.
03:26They expect energy inflation is up by 11%.
03:30So, of course, yes, this is important.
03:32When it comes to the FOMC meetings, we will have to keep an eye on what the officials are saying
03:39or were saying about growth projections.
03:41Because now this is a huge debate about inflation versus growth.
03:46Because when consumers have to pay more at the pump, or even if you don't have a car, right, it's
03:51a farm-to-table economy.
03:52Our grocery stores, they also deliver goods and everything.
03:56And it all depends on gasoline prices.
04:00So they will have to make choices at some point.
04:03If it happens, we will see less consumption.
04:05And, of course, that is going to have a big impact on the U.S. economic growth.
04:09So we will see what the minutes disclose about what officials were saying about these growth projections.
04:15I also want to ask, we asked this of Mike McKee yesterday, but I'm going to ask you as well.
04:19When we see these rallies, it seems like the market is looking for any strand of hope to hold on
04:25to.
04:26Do you think these peaks are realistic?
04:28Do you think they're aspirational?
04:29And do you think at some point they're going to stop?
04:31You mean the stop in terms of rally?
04:35Well, we see the market rally any time there's any sign of hope from the president.
04:38Any time the president says something that the market's like, we see that immediately reflective.
04:41There doesn't seem to be any check on that because it seems like they're just looking for reasons to see
04:48hopefulness in the rally,
04:49to see an end to this conflict.
04:51Do you think that's going to continue?
04:53I think many investors want, at least if it's not a resolution, but Goldman Sachs Trading Desk actually published a
04:59nice note last week.
05:00They said the market doesn't really need a very clear, doesn't need to wait for a peace deal.
05:08They need to see a signal when both sides send the same message.
05:13That would be the opportunity for stock pickers, long investors or traders to start buying the dip more aggressively.
05:21And that would probably be a good, solid starting point for stocks to move higher on a more sustainable basis.
05:27For now, it's just technical.
05:29Traders are trying to play, navigate the market, cover short positions, et cetera.
05:34Well, you mentioned the FOMC meeting, so that's taking place later this month.
05:37Jay Powell's last time talking.
05:39I mean, how focused are people going to be on his words and what he's saying?
05:43I think they will be focused, of course, because, you know, it's always interesting to learn what Jay Powell is
05:48saying about the stock market.
05:49Of course, the market wants to know what's next, what's next for the next Fed chair.
05:55It's not going to be an easy job, especially right now.
05:58But, again, as of now, we see data showing strong U.S. economic growth.
06:04We had good payrolls report, much better than expected.
06:07So there are no signs that the U.S. economy is in a very bad shape.
06:12So it is not an easy job for the Fed right now.
06:14And for now, most economists, they don't expect the Fed will cut anytime soon.
06:19They will keep an eye on the stock market, on the economic growth.
06:22If the strait reopens, there's an important ultimatum tomorrow night that could be critical for the way forward here for
06:28energy prices and for the markets.
06:30If there is a sign that the strait is reopening, does that short squeeze bring the biggest rally yet?
06:36I think we may see more short covering, for sure, because it will be a positive signal for the stock
06:41market.
06:42However, I keep hearing more and more that economists, stock market strategists, they already model oil prices at around $100
06:52per barrel up until the end of this year.
06:55I mean, no one knows for sure, but people are pretty pessimistic on energy prices, and as a result, it's
07:01going to affect positioning.
07:03And all that rally that we saw last year in economically sensitive sectors, it's not going to work right now.
07:10I'm talking about materials, industrials, et cetera.
07:13So what works right now is energy, AI, and, of course, we are just a couple of weeks away from
07:20the earnings season.
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