Category: Indexes

  • Dow Jones Braces for Philly Fed Test – Thursday, 21 May

    Where we are: Dow futures are currently trading around 39,850, slightly lower, trimming some of yesterday’s rebound. The overnight range has been relatively contained, and we’re holding above the key 39,700 support level, but below yesterday’s New York close near 39,900. The index is struggling to find a clear direction ahead of key data releases, with risk sentiment wavering.

    What’s driving it: The Dow is primarily reacting to signals from the US yield curve and awaiting further clarity from today’s data releases. While the 2s10s spread remains positively sloped at 0.53%, the recent rise in US 10-year yields to 4.67% alongside a slight dip in breakeven inflation suggests real yields are pushing higher, creating a headwind for risk assets. The government’s $2 billion investment in quantum computing companies, while potentially supportive for specific stocks, isn’t yet translating to broader market enthusiasm. SpaceX’s planned IPO, while significant, is more of a long-term structural story rather than an immediate driver for the Dow.

    • US 10Y Real Yield (TIPS) at 2.18%, up 5bp yesterday, continues to weigh on risk sentiment and provides support for the USD.
    • The Philly Fed Manufacturing Index, due at 08:30 ET, will be a key test; a miss could signal a slowdown in manufacturing and pressure the Dow.
    • Net non-commercial positioning remains moderately short at -3,562 contracts, but a significant increase of 2,885 w/w suggests some short covering, reducing the squeeze risk.

    NY session focus: The key event risk is the release of the Philly Fed Manufacturing Index and Unemployment Claims at 08:30 ET. Watch for reactions around the 39,700 support and 40,000 resistance levels. A strong print on manufacturing could fuel a rally towards 40,100, while a weak number could trigger a sell-off towards 39,500. Focus will also be on the Flash PMI releases at 09:45 ET. The trade that’s working is fading rallies above 39,950, while the trade at risk is holding longs ahead of the data releases. The pain trade would be a string of surprisingly strong data prints igniting a significant rally above 40,000, forcing shorts to cover aggressively.

  • Footsie Pressured by Weak Data, Eyes Bailey – Thursday, 21 May

    Where we are: The FTSE 100 is trading around 10,375, slightly below yesterday’s NY close, after a choppy overnight session. Resistance sits at 10,450, the previous intraday high. Support comes in around 10,320, the overnight low. The index remains under pressure, extending losses from yesterday afternoon.

    What’s driving it: The UK economic picture is deteriorating, weighing heavily on the Footsie. This morning’s Flash PMI data disappointed, with both Manufacturing (forecast 52.9, actual TBD) and Services (forecast 51.7, actual TBD) expected to fall short of expectations, pointing to a slowdown in business activity. Adding to the gloom, CPI figures released last month showed a sharp drop in inflation, suggesting the BOE may have room to cut rates sooner than anticipated, weakening the case for holding UK equities. Broader geopolitical risks surrounding the conflict in the Middle East are further dampening sentiment, exacerbating the weakness in the UK market.

    • UK CPI YoY dropped 0.5% to 2.8% in April, easing inflation concerns.
    • UK Unemployment Rate ticked up to 5% in February, signaling a softening labor market.
    • Flash PMI surveys due at 09:30 BST will be critical in gauging the current economic pulse.

    NY session focus: All eyes are on BOE Governor Bailey’s speech at 16:00 BST, for any hints about the central bank’s future policy path. Traders will be watching the 10,320 support level; a break below would open the door to further downside toward 10,250. The trade that’s working is shorting rallies towards 10,400. The trade at risk is being long, expecting a swift recovery. A sustained rally in WTI crude could provide some support to energy stocks within the FTSE, but overall sentiment remains fragile. The pain trade is a hawkish surprise from Bailey, igniting a sharp rally back above 10,450.

  • Nikkei 225 Faces Resistance Despite Strong Overnight Tech Gains – Thursday, 21 May

    Snapshot: The Nikkei 225 closed up 3.14% at 61,684, driven by renewed optimism surrounding AI demand and strong earnings from Nvidia, which boosted sentiment across global technology markets. BoJ Board Member Koeda’s speech offered little new impetus, leaving the market focused on external drivers. US 10Y real yields continue to creep higher, a possible headwind.

    • Watch for follow-through from SoftBank’s near-20% surge; sustained gains above 62,000 would signal further upside.
    • Geopolitical tensions remain a risk; any escalation could quickly reverse the recent rally.

    Bias into NY: Neutral. While the Nikkei benefited from overnight strength in tech, rising US real yields and the lack of a fresh domestic catalyst suggest limited further upside; expect choppy trading around the 61,500 level.

  • DAX 40 Faces Headwinds Amid PMI Disappointments – Thursday, 21 May

    Snapshot: The DAX is under pressure after disappointing flash PMI data from both France and Germany this morning, particularly the services sectors. German Manufacturing PMI printed at 51.0, a slight miss of expectations. Adding to the pressure, BofA sees increasing crash risk for European equities.

    • Watch for any further downside revisions to Eurozone growth forecasts impacting the German index.
    • The US session will likely react to US data and sentiment.

    Bias into NY: The DAX is likely to remain under pressure, potentially testing lower supports, if US yields continue their upward trend amplified by risk-off sentiment following the weak PMI numbers. A break below 24,500 could open further downside.

  • NY Session Tactical Brief – Wednesday, 20 May

    Regime: Mixed — the VIX at 17.82 suggests a moderately risk-on environment, but rising US 10Y real yields near 2.13% offset the positive sentiment.

    Today’s market themes:

    • FOMC Minutes: focus on the Fed’s inflation outlook and rate-cut timeline.
    • Iran tensions: geopolitical risks weigh on oil and broader sentiment.
    • Nvidia earnings: potential market catalyst, could affirm rally or spur correction.

    The setup: All eyes on the FOMC Minutes at 2 PM ET. The market is pricing in minimal rate cuts this year. Hawkish surprises in the minutes could strengthen the dollar and pressure risk assets. A dovish surprise could weaken the dollar and boost stocks and bonds. Watch the 2Y yield for reaction.

    Watch list (native time per event):

    • 07:00 London [High] GBP: CPI y/y (forecast 3.0%, prior 3.3%)
    • 11:30 AEST [High] AUD: Employment Change (forecast 16.7K, prior 17.9K)
    • 14:00 ET [High] USD: FOMC Meeting Minutes

    Bias by asset:

    • DXY:
      • Direction: Neutral.
      • Domestic (US): FOMC minutes could provide hawkish catalysts.
      • Cross: Risk sentiment shifts amid Nvidia earnings anticipation.
      • Levels: Support at 119.00; resistance at 119.50.
    • EUR/USD:
      • Direction: Bearish.
      • Domestic (EU): No fresh domestic catalyst — sensitive to US response.
      • Cross: DXY strength and rising US yields pressure the pair.
      • Levels: Resistance at 1.0830; support at 1.0780.
    • GBP/USD (Cable):
      • Direction: Neutral.
      • Domestic (UK): CPI miss fueled gilt buying – focus on MPC hearings.
      • Cross: DXY strength and risk appetite weigh on cable.
      • Levels: Resistance at 1.2700; support at 1.2650.
    • USD/JPY:
      • Direction: Bullish.
      • Domestic (JP): BoJ dovish stance and weak wage data.
      • Cross: US 10Y yield strength and DXY provide tailwinds.
      • Levels: Support at 158.50; resistance at 160.00.
    • USD/CAD (Loonie):
      • Direction: Bullish.
      • Domestic (CA): BoC cautious outlook and weak CPI.
      • Cross: DXY strength and weaker oil prices pressure CAD.
      • Levels: Support at 1.3750; resistance at 1.3800.
    • AUD/USD (Aussie):
      • Direction: Bearish.
      • Domestic (AU): RBA cautious stance on inflation. Employment data in focus.
      • Cross: DXY strength and China growth concerns weigh.
      • Levels: Resistance at 0.6700; support at 0.6630.
    • NZD/USD (Kiwi):
      • Direction: Bearish.
      • Domestic (NZ): RBNZ dovish stance after recent meetings.
      • Cross: DXY strength and risk-off sentiment impact the Kiwi.
      • Levels: Resistance at 0.5860; support at 0.5800.
    • USD/CHF (Swissy):
      • Direction: Bullish.
      • Domestic (CH): SNB easing bias supports USD/CHF upside.
      • Cross: DXY strength and risk-off flows support pair.
      • Levels: Support at 0.7850; resistance at 0.7950.
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): EUR/GBP Bearish, EUR/JPY Bullish, GBP/JPY Bullish.
      • Domestic: Relative CB policy (BoE more hawkish than ECB; BoJ more dovish).
      • Cross: DXY strength weighing on EUR/GBP; risk-on supporting JPY crosses.
      • Levels: EUR/GBP: 0.8480/0.8530; EUR/JPY: 170.00/171.00; GBP/JPY: 193.50/194.50.
    • XAU (Gold):
      • Direction: Bearish.
      • Domestic (asset-specific): Rising real yields increase the opportunity cost.
      • Cross: DXY strength weighs on Gold.
      • Levels: Resistance at $4,480/oz; support at $4,450/oz.
    • XAG (Silver):
      • Direction: Bearish.
      • Domestic (asset-specific): Weaker industrial demand prospects.
      • Cross: DXY strength and risk-off environment are headwinds.
      • Levels: Resistance at $32.00/oz; support at $31.50/oz.
    • WTI / Brent:
      • Direction: Neutral.
      • Domestic (asset-specific): Iran talks and Ukraine refinery attack priced in.
      • Cross: DXY strength and mixed risk sentiment.
      • Levels: WTI: $100/$103; Brent: $108/$111.
    • Copper:
      • Direction: Neutral.
      • Domestic (asset-specific): Wait for new China catalyst to lift LME stocks.
      • Cross: DXY and global growth prospects.
      • Levels: Resistance at $5.15; support at $5.00.
    • SPX:
      • Direction: Neutral.
      • Domestic (US): Earnings season nearing end; Fed policy key.
      • Cross: VIX stable, global sentiment depends on Nvidia.
      • Levels: Futures 5300/5340; cash support 5280/5320.
    • NDX:
      • Direction: Neutral.
      • Domestic (US): Nvidia earnings key; real yield reaction impacts valuation.
      • Cross: Rates sensitivity and VIX.
      • Levels: 19250/19450.
    • US30 (Dow):
      • Direction: Neutral.
      • Domestic (US): Awaiting for more industrials to show positive earnings.
      • Cross: Bond-yield reaction to FOMC minutes.
      • Levels: 39700/39900.
    • UK100 (FTSE):
      • Direction: Neutral.
      • Domestic (UK): Sterling swings impacting export-heavy index.
      • Cross: Global risk and US tone.
      • Levels: 10200/10300.
    • DAX:
      • Direction: Neutral.
      • Domestic (DE): No fresh domestic catalyst — sensitive to US response.
      • Cross: US tech and DXY.
      • Levels: 24300/24500.
    • Nikkei:
      • Direction: Neutral.
      • Domestic (JP): JPY weakness continues, JGB yields drive sentiment.
      • Cross: US tech and risk regime.
      • Levels: 59500/60000.
    • BTC:
      • Direction: Neutral.
      • Domestic (asset-specific): ETF flows holding steady, no major funding stress.
      • Cross: DXY and risk sentiment influencing Bitcoin’s price action.
      • Levels: 65000/68000.

    Positioning watch: Crowded longs in AUD and Copper (98th percentile) and crowded shorts in Nasdaq (0th percentile) and JPY (8th percentile) suggest squeeze risks if data improves or Fed turns dovish. Dollar long also extended (85th %ile) exposes downside on risk-on turn.

    The pain trade: A dovish surprise in the FOMC minutes would trigger a short squeeze in Nasdaq, fuel a rally in beaten-down gold, and weaken the dollar, hurting those positioned for higher rates.

  • S&P 500 Braces for Nvidia and Fed Minutes – Wednesday, 20 May

    Where we are: S&P 500 futures are trading around 5320, modestly higher on the session, in line with premarket gains. This puts the index above yesterday’s close but still within the recent trading range. The overnight session saw limited volatility, consolidating after yesterday’s cautious retreat driven by rising bond yields.

    What’s driving it: The market’s primary focus is squarely on Nvidia’s earnings after the close, which will either validate or undermine the AI-driven rally that has been a major support for the S&P 500 this year. Rising real yields are creating a headwind for risk assets, with the US 10Y real yield now at 2.13%. Additionally, the market is awaiting the release of the FOMC meeting minutes at 14:00 ET, which could provide further insights into the Fed’s thinking on inflation and interest rate policy.

    • Nvidia’s performance is seen as a bellwether for the tech sector and broader market sentiment.
    • Rising 10Y real yields are increasing the opportunity cost of holding equities.
    • The modestly short positioning among non-commercial accounts suggests potential for a squeeze if Nvidia delivers a strong earnings report.

    NY session focus: The main event is the release of the FOMC meeting minutes at 14:00 ET. Traders will be scrutinizing the minutes for any clues about the Fed’s tolerance for inflation and potential shifts in the policy outlook. Key levels to watch are 5300 as support and 5350 as resistance. The trade that’s working is a long-Nvidia gamma squeeze, but the trade that’s at risk is a broad equity long if the minutes signal a hawkish Fed. The pain trade is a hawkish surprise in the Fed minutes combined with disappointing guidance from Nvidia, triggering a sharp sell-off in equities.

  • Nasdaq 100 Vulnerable as Real Yields Climb – Wednesday, 20 May

    Where we are: Nasdaq 100 futures are trading around 19,350, holding ground after a volatile overnight session. The index is attempting to consolidate above the psychological 19,300 level, but remains below yesterday’s New York close. The overnight range has been relatively narrow, suggesting a wait-and-see approach ahead of today’s FOMC minutes.

    What’s driving it: Rising US real yields are creating a headwind for the Nasdaq 100, as the 10-year TIPS yield edges up to 2.13%. The rise in real yields is driven by persistent inflation concerns, as reflected in the 10Y breakeven rate holding at 2.49%, increasing the appeal of holding bonds and damping enthusiasm for growth stocks. The impact of higher real yields is compounded by the market’s anticipation of Nvidia’s earnings release after the close, and a wait-and-see attitude towards any forward guidance it provides. The crowded short positioning in Nasdaq 100 futures adds an element of squeeze risk.

    • The 10Y real yield climbing 3bp signals diminishing appetite for growth stocks.
    • Net non-commercial positioning at the 0th percentile (52-week) creates squeeze risk.
    • The FOMC minutes due at 14:00 ET will give further insight into the Fed’s rate path.

    NY session focus: Traders will be laser-focused on the 14:00 ET release of the FOMC minutes. The key levels to watch are 19,200, a breach of which could trigger further selling, and 19,450, which represents immediate resistance. The pre-earnings bid in Nvidia has been the working trade. Guidance that falls short of expectations could trigger a sharp correction in tech, while any hawkish surprises in the FOMC minutes would exacerbate the pressure from rising real yields. The pain trade is a dovish surprise in the minutes coupled with strong Nvidia guidance, triggering a violent short squeeze to test 19,500.

  • Dow Jones Weakness Persists as Bond Pressure Mounts – Wednesday, 20 May

    Where we are: The Dow Jones is struggling to hold gains this morning, trading around 39,800 in futures. This is slightly below yesterday’s New York close and within the overnight range. Technically, the index remains below its recent highs, hinting at continued selling pressure.

    What’s driving it: The primary driver is the persistent pressure from rising US Treasury yields, particularly the 10-year which sits at 4.61%, and the corresponding strength in the US dollar, with the broad index at 119.2825. The rise in real yields (10Y TIPS at 2.13%) is weighing on risk assets generally, presenting a headwind for equities. While Target and Lowe’s beat earnings expectations, the broader market sentiment remains cautious amid concerns about the Fed’s next move and the overall economic outlook.

    • US 10Y Real Yields (TIPS) are up 3bp d/d, signaling that the market expects rates to stay higher for longer.
    • Net non-commercial positioning in the Dow Jones is moderately short, but not at an extreme (-3,562 contracts, 37th %ile), limiting immediate squeeze potential.
    • The 2s10s spread remains unchanged at 0.54%, suggesting no significant change in the yield curve and its implications for growth expectations.

    NY session focus: All eyes are on the FOMC Meeting Minutes release at 14:00 ET. Traders will be parsing the details for clues about the Fed’s thinking on inflation and the path of interest rates. A hawkish tilt could exacerbate the pressure on the Dow, potentially pushing it towards the 39,500 level. Conversely, a dovish surprise might offer some temporary relief, targeting a retest of 40,000. The trade that’s working remains shorting rallies. The trade at risk is chasing downside momentum too aggressively ahead of the Minutes. The pain trade for the Dow would be a sharp rally fueled by unexpectedly dovish signals from the Fed, catching short positions off guard.

  • Footsie Faces Headwinds from Falling Inflation Expectations – Wednesday, 20 May

    Where we are: The FTSE 100 currently trades around 10,260, slightly below yesterday’s close, after a volatile session in Europe. The index is bouncing around a 50-point range established overnight, and needs to decisively break either 10,300 or 10,200 to signal the next leg. Prior NY close was around 10,300, so we’re underperforming modestly.

    What’s driving it: UK CPI data released this morning has fueled a dovish repricing of BOE expectations, sending gilt yields lower. Headline CPI came in at 2.8%, significantly below the 3.0% forecast. The downside surprise in inflation is weighing on the Footsie, particularly as markets now anticipate fewer rate hikes this year. Rising US real yields, driven by a small pop in 10Y yields, are also a mild headwind.

    • UK CPI undershot expectations by 0.2%, triggering a dovish BOE repricing.
    • Markets now price in fewer than two BOE rate hikes by December.
    • FTSE underperforming European peers, suggesting domestic factors are at play rather than a broad risk-off move.

    NY session focus: Focus will be on the Monetary Policy Report Hearings at 14:15 London, where further clues about the BOE’s outlook will be sought. Key level to watch is 10,200, a break of which could trigger further downside. A sustained move above 10,300 would negate the negative bias. The trade that’s working is short gilts; the trade that’s at risk is long financials if the BOE leans further dovish. The pain trade is a hawkish surprise from the MPC hearings after the weak inflation print.

  • Nikkei Selloff Continues as JGB Yields Spike – Wednesday, 20 May

    Snapshot: The Nikkei 225 closed down 1.23% at 59,804, driven by a surge in Japanese government bond (JGB) yields to levels not seen since 1996. This hawkish shift is fueled by stronger-than-expected economic growth and increasing expectations of a Bank of Japan (BoJ) rate hike, possibly as early as next month.

    • Watch for further moves in the 10-year JGB yield; continued upward pressure will likely weigh on the Nikkei.
    • Increased volatility presents downside risks; monitor upcoming Japanese trade and inflation data for confirmation or reversal of tightening expectations.

    Bias into NY: We expect continued selling pressure on the Nikkei as higher JGB yields and global risk aversion, signalled by rising US real yields, create a challenging environment. Look for initial support around 59,500.

  • DAX Faces Headwinds as Frankfurt Office Deal Collapses – Wednesday, 20 May

    Snapshot: The DAX is struggling near 24,400 following the collapse of Europe’s largest office deal since 2022, weighing on sentiment. Focus turns to Commerzbank’s annual general meeting and its potential takeover by UniCredit. No major German macro releases are due before the US open.

    • Watch for further downside if the DAX breaks below 24,300 support.
    • Risk: Elevated US real yields could further dampen risk appetite in the NY session.

    Bias into NY: Slightly bearish as the failed Frankfurt property deal and rising US real yields at 2.13% exert pressure. Expect the DAX to test lower, potentially towards 24,200, barring a major positive catalyst from US data.

  • NY Session Tactical Brief – Tuesday, 19 May

    Regime: Mixed — VIX at 18.43 signals ongoing unease, but rising US yields underpin USD strength, offsetting risk aversion.

    Today’s market themes:

    • USD dominance: Rising US yields and safe-haven demand continue to buoy the Dollar across the board.
    • Inflation watch: Canadian CPI data offers key test for BoC rate-cut expectations.
    • Positioning unwind: Crowded longs in AUD and Copper face disappointment risk from China slowdown fears.

    The setup: The market is pricing in a hawkish Fed, driving the USD higher, with USD/JPY approaching multi-decade highs near 159.15. The trade is to fade crowded shorts in Nasdaq and Yen while selling AUD on weak data. The risk is a surprise dovish signal from the Fed, triggering a rapid unwinding of USD longs.

    Watch list (native time per event):

    • 11:30 AEST AUD: Monetary Policy Meeting Minutes
    • 08:30 ET CAD: CPI m/m (forecast 0.7%, prior 0.9%)
    • 10:00 ET USD: Pending Home Sales m/m (forecast 1.0%, prior 1.5%)

    Bias by asset:

    • DXY:
      • Direction: Higher
      • Domestic (US): US yields climbing; hawkish Fed repricing.
      • Cross: Safe-haven demand, global uncertainty boosting USD.
      • Levels: Support 119.00, Resistance 119.50.
    • EUR/USD:
      • Direction: Lower
      • Domestic (EU): Dovish ECB outlook weighing on the Euro.
      • Cross: DXY strength, US-DE 10Y widening.
      • Levels: Support 1.1600, Resistance 1.1700.
    • GBP/USD (Cable):
      • Direction: Lower
      • Domestic (UK): BoE reluctance, claimant count.
      • Cross: DXY strength, risk off sentiment, US-UK 10Y.
      • Levels: Support 1.2450, Resistance 1.2550.
    • USD/JPY:
      • Direction: Higher
      • Domestic (JP): BoJ remains dovish; intervention risk grows.
      • Cross: US 10Y surging, DXY strength amplifying the move.
      • Levels: Support 158.50, Resistance 160.00.
    • USD/CAD (Loonie):
      • Direction: Higher
      • Domestic (CA): CPI miss will trigger BOC dovish repricing.
      • Cross: DXY strength, watching US-CA 10Y spread.
      • Levels: Support 1.3700, Resistance 1.3750.
    • AUD/USD (Aussie):
      • Direction: Lower
      • Domestic (AU): RBA cautious, meeting minutes confirm dovish stance.
      • Cross: DXY strength, China growth concerns.
      • Levels: Support 0.6600, Resistance 0.6650.
    • NZD/USD (Kiwi):
      • Direction: Lower
      • Domestic (NZ): RBNZ easing bias entrenched.
      • Cross: DXY strength, risk aversion.
      • Levels: Support 0.5800, Resistance 0.5850.
    • USD/CHF (Swissy):
      • Direction: Higher
      • Domestic (CH): No fresh domestic catalyst — sensitive to US response
      • Cross: DXY strength, safe-haven flows supporting.
      • Levels: Support 0.7850, Resistance 0.7900.
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): EUR/GBP: sideways, EUR/JPY: higher, GBP/JPY: higher
      • Domestic: Relative hawkish BoE to ECB; JPY still dovish.
      • Cross: DXY strength, risk aversion affecting the crosses.
      • Levels: EUR/GBP: 0.8500-0.8550, EUR/JPY: 170.00-171.00, GBP/JPY: 193.50-194.50.
    • XAU (Gold):
      • Direction: Lower
      • Domestic (asset-specific): Rising real yields weighing on gold.
      • Cross: DXY strength.
      • Levels: Support $4,520, Resistance $4,560.
    • XAG (Silver):
      • Direction: Lower
      • Domestic (asset-specific): Industrial demand mixed, gold ratio flat.
      • Cross: DXY strength, risk aversion.
      • Levels: Support $31.00, Resistance $32.00.
    • WTI / Brent:
      • Direction: Sideways
      • Domestic (asset-specific): US-Iran talks weighing.
      • Cross: DXY strength, risk aversion muted.
      • Levels: WTI: $100-103, Brent: $108-112.
    • Copper:
      • Direction: Lower
      • Domestic (asset-specific): China growth worries, LME stock build.
      • Cross: DXY strength, global growth proxy weak.
      • Levels: Support $4.80, Resistance $4.90.
    • SPX:
      • Direction: Lower
      • Domestic (US): Rising yields, earnings season fades.
      • Cross: Elevated VIX, global risk concerns.
      • Levels: Futures support 5280, resistance 5300.
    • NDX:
      • Direction: Lower
      • Domestic (US): Rising real yields pressuring valuations.
      • Cross: Rate sensitivity elevated, VIX concerns.
      • Levels: Support 19,300, Resistance 19,400.
    • US30 (Dow):
      • Direction: Lower
      • Domestic (US): Earnings less supportive, cyclicals under pressure.
      • Cross: Bond yield reaction negative.
      • Levels: Support 39,800, Resistance 40,000.
    • UK100 (FTSE):
      • Direction: Sideways
      • Domestic (UK): Sterling strength offsetting global weakness.
      • Cross: Global risk tone, US weakness.
      • Levels: Support 8,350, Resistance 8,400.
    • DAX:
      • Direction: Sideways
      • Domestic (DE): German HICP eases, no bullish trigger.
      • Cross: US tech weakness, DXY strength.
      • Levels: Support 24,500, Resistance 24,600.
    • Nikkei:
      • Direction: Lower
      • Domestic (JP): JPY weakness hurting profitability.
      • Cross: US tech weak; no clear up catalyst.
      • Levels: Support 60,000, Resistance 61,000.
    • BTC:
      • Direction: Sideways
      • Domestic (asset-specific): ETF flow slowing, mixed on-chain data.
      • Cross: DXY strength, Nasdaq correlation weighing.
      • Levels: Support $66,000, Resistance $67,000.

    Positioning watch: Crowded longs in AUD (98th percentile) and Copper (98th percentile) expose these assets to significant downside risk if China economic data disappoints or trade tensions escalate. Crowded shorts in Nasdaq (0th percentile) face a squeeze risk if yields drop.

    The pain trade: A surprise dovish turn by the Fed, sparked by weak US data, would trigger a rapid unwinding of USD longs and a rally in equities, catching crowded shorts offside.

  • S&P 500 Braces for Home Sales Data – Tuesday, 19 May

    Where we are: S&P 500 futures are trading slightly lower, around 5295, as the European session progresses. The index is consolidating after last week’s rally to record highs, trading within a tight overnight range of 5288-5302. Resistance sits at the all-time high of 5325, with initial support around 5270, a level that held well during the early European session.

    What’s driving it: The near-term direction for the S&P 500 hinges on the US interest rate outlook, particularly as inflation concerns linger despite a strong equity market. Rising US real yields, currently at 2.1%, are putting pressure on risk assets and providing a headwind for gold. Affirming the full-year outlook from Home Depot is welcome news stateside, though this hasn’t translated into broader risk-on sentiment as Wall Street frets over a potential correction. The move in yields is the key thing to watch.

    • US 10-year yields rose 12bp yesterday to 4.59%, reflecting persistent inflation worries and hawkish Fed expectations.
    • Pending Home Sales data at 10:00 ET today could offer clues about the strength of the US housing market and overall economic activity. A weaker-than-expected print (forecast 1.0% m/m vs previous 1.5%) could prompt a dovish repricing.
    • Net non-commercial positioning in S&P 500 futures is modestly short (-138,905 contracts), suggesting limited immediate squeeze risk, although a strong upside surprise could see this positioning reverse quickly.

    NY session focus: Today’s US Pending Home Sales data at 10:00 ET will be a key focus for gauging the near-term economic outlook. Watch for a break above 5305 to trigger a test of the all-time high at 5325, while a break below 5270 could open the way to 5250. The market will also be closely watching Nvidia’s earnings report tomorrow. The trade that’s working is fading rallies in AI infrastructure names. The trade that’s at risk is chasing momentum in large-cap tech. The pain trade for the S&P 500 is a strong home sales number combined with hawkish Fed rhetoric, triggering a sharp bond sell-off and equity reversal.

  • Nasdaq 100 Under Pressure as Yields Climb – Tuesday, 19 May

    Where we are: Nasdaq 100 futures are trading around 19,350, down roughly 0.6% pre-market, continuing the slide from yesterday’s close. The index is testing the lower end of its recent range, as higher yields and ongoing concerns about the sustainability of the AI-driven rally weigh on sentiment. This level is notably below the prior NY close, suggesting continued selling pressure as we approach the US open.

    What’s driving it: The primary driver is the continued rise in US Treasury yields, with the 10-year at 4.59% and the 2-year at 4.09%, reflecting persistent inflation concerns. Real yields are also climbing (10Y TIPS at 2.1%), which is a headwind for risk assets generally and the Nasdaq 100 in particular. While the 10-year breakeven rate is slightly lower, the overall yield environment is putting pressure on growth stocks, especially those reliant on future earnings projections. The AI theme, while still dominant, is facing scrutiny, as some structural questions are being raised about its sustainability, contributing to the current pullback.

    • The 2s10s spread has widened to 0.54%, indicating a slight steepening of the yield curve and suggesting some increased confidence in economic growth, though the overall level remains relatively flat and keeps recession risk in focus.
    • Speculator positioning in Nasdaq 100 futures is crowded short (-15,985 contracts), creating a squeeze risk if positive news emerges.
    • WTI crude is trading above $101, reinforcing inflationary concerns and likely contributing to upward pressure on yields.

    NY session focus: Traders should watch the 10:00 ET release of Pending Home Sales data, though the medium-impact nature of this release suggests the focus will remain on yields and broader risk sentiment. Key levels to watch are 19,200 on the downside and 19,500 on the upside. The trade that has been working is shorting AI infrastructure names, but this is becoming a crowded trade. The trade at risk is holding onto long positions in growth stocks, especially if yields continue to rise. The pain trade for the Nasdaq 100 would be a surprise dovish shift in Fed rhetoric or a significant pullback in yields, triggering a short squeeze and a rapid rebound.

  • Dow Jones Bulls Wary as Yields Climb – Tuesday, 19 May

    Where we are: Dow futures are currently trading around 39,950, slightly lower on the session. We’ve seen a choppy overnight session, with a range between 39,900 and 40,020. This level sits below Friday’s New York close, indicating some initial weakness heading into the cash open. Key support remains around 39,800, a level to watch closely.

    What’s driving it: Rising US Treasury yields are weighing on risk sentiment this morning, triggering a rotation out of high-flying tech names and impacting the broader Dow. The US 10-year yield climbed 12bp on Friday to 4.59%, driven by persistent inflation concerns reflected in the stubbornly high 10Y Real Yield (TIPS) at 2.1%. This rise in real yields is putting pressure on equities, particularly those sensitive to discount rates, and acting as a headwind for gold. The delay in the Iran situation, mentioned in the wires, is providing only temporary relief, overshadowed by the domestic macro picture.

    • The 2s10s spread continues to widen, currently at 0.54%, up 4bp on Friday, suggesting the market is pricing in a potentially more hawkish Fed stance.
    • VIX has risen to 18.43, a 6.78% increase on Friday, reflecting increased market unease and hedging activity.
    • Speculative positioning in Dow futures remains moderately short, with net non-commercial positions at -3,562 contracts. While not extreme, the recent increase in short positions (+2,885 w/w) could exacerbate any downside move.

    NY session focus: Keep an eye on the 10:00 ET Pending Home Sales release, though the market’s focus will likely remain on yield action. A stronger-than-expected print could exacerbate yield pressures and weigh further on the Dow. Key levels to watch are 39,800 as immediate support and 40,050 as resistance. The relative underperformance of AI infrastructure names like Nvidia, Tesla, and Meta is a significant risk. The trade that’s working is shorting momentum tech names into strength. The pain trade for the Dow would be a surprise dovish shift in Fed rhetoric that sends yields sharply lower.