Trading Desk

VIX (Cboe Volatility Index) appears to be building a base around 17 as SPX (S&P 500) prints new ATHs.

NVDA (Nvidia) managed to hold my 196 support before reversing and closing above the key 208 level on Friday. This is a very bullish signal. A sustained close above 208, and perhaps a rally from here, would suggest an end to the consolidation over the past six months.

However, the steep rise in the semiconductor sector is flashing warning signs, as it increasingly resembles the classic pattern of a euphoric stage, often followed by a devastating correction. NVDA did not contribute much to this rally, but it is not immune to drawdowns once a correction is due in SOXX (Semiconductor ETF). For bulls, I would not chase it here. The entry opportunity was on the pullback toward 196. For bears, watch SOXX closely, along with key memory/storage names such as SNDK (SanDisk) and MU (Micron).

USDJPY For USDJPY to initiate a self-reinforcing downward spiral, the BOJ must sustain a break below the 155.5 level for a few days. Otherwise, the path of least resistance remains to the upside.

DXY99 remains the key resistance. As long as DXY remains below 99, it stays supportive of equities and commodities. A breach above 99 suggests a probe into the 100 area.

NDX NQ1!

SPX broke out above the broadening pattern. I had expected the euphoric surge to come after a pullback toward 6.8k, but the market got impatient and skipped halftime.

Tighten your stops as price goes vertical.

XAGUSD Silver must sit above 80.8 to see further upside.

Higher oil prices -> higher yields -> sustained pressure on silver, and vice versa.

US30Y Another failed attempt, stopped by fake peace-deal headlines. Trump can only play this trick for so long. I must give him credit for managing yields this well simply by manipulating media outlets with fake news. Momentum remains to the upside unless we see real progress on a peace deal.

CL1! Oil was dumped on Wednesday following Axios fake news regarding a peace deal, only to rebound sharply and recoup half of its losses on the same day.

BZ1!

BZ1! SpotBrent (Brent crude spot) remains capped by the recent high around 120. Each time it tries to break higher, we get fake news about a peace deal.

For BZ (Brent futures), a breach below 86 would suggest real progress on a peace deal, while a break above 115-120 would suggest escalation.

HG1! Copper is heading toward the upper end of the channel.

XOP has retraced disproportionately relative to the drop in oil prices. XOP topped before oil topped back in April, ahead of the ceasefire. Maybe they know something I don’t.

SOXX I had expected a pullback before the euphoria resumed in 1999 fashion, before eventually collapsing. But the market appears to need no break and has decided to run full speed.

For bears, wait for confirmation before entering. The market can stay irrational longer than you can stay solvent. For bulls, risk management is paramount in this environment. Protect your profits with stops.

MAGS After stalling around the 67 level for three weeks, MAGS (Magnificent 7) finally broke above the downtrend resistance line.

XAUUSD Gold remains range-bound between 4500 and 4840, with 4650 and 4770 switching between resistance and support.

For gold to head higher, it must reclaim 4770 and the previous high of 4840, after which we could see an attempt to test 5k.

Higher oil prices -> higher yields -> sustained pressure on gold, and vice versa.

USDJPY For USDJPY to initiate a self-reinforcing downward spiral, the BOJ must sustain a break below the 155.5 level for a few days. Otherwise, the path of least resistance remains to the upside.

BTC1! Market Update

Chart: Binance BTCUSDT perpetual · Asset Tag: CME Bitcoin futures (BTC1!).

AI mania has proven exceptionally strong against the geopolitical backdrop. I was expecting a pullback from the upper bound of the broadening pattern, followed by a final euphoria rally before we see a generational collapse. ES1! briefly dipped below 7.2K on Monday and has since reversed much higher. If SPX manages to sustain above the upper bound of the broadening pattern I outlined in Tactical Positioning last weekend, this scenario could be nullified.

Semis are getting overextended again on both the weekly and monthly charts. We tried to short both NVDA and SOXX last week. NVDA was stopped out at breakeven, while SOXX was trailed out with a modest profit before it reversed 15% higher. This is precisely why risk management is essential in the current environment. I will be looking for opportunities to rebuild our SOXX shorts in the coming weeks, if not days.

Every bubble has very similar traits. Each feels revolutionary, and a good portion of them actually are. But when the market has priced in decades of future profits, a correction may be due. It is imperative to understand that bubbles usually do not burst on major headlines. We usually get the market top when everything seems to be running at full speed.

On the geopolitical front, we got rumors of a potential peace deal during the Asia session. CL1! briefly traded below 90 and BZ1! briefly traded below 100 before recovering half of their losses before the U.S. open. I stand by my view that a peace deal is hard to reach. If I am right, oil should grind back above 100. Again, a breach below 80 would suggest real progress on a peace deal. Any volatility that fails to achieve that should be treated as noise.

We believe the BOJ has intervened four times since 04/30. Each attempt saw USDJPY dump to the 155 level.. Despite these efforts, USDJPY technicals remain intact. Note that no matter how deep a country's FX reserves are, if the fundamentals are bad enough, the line will eventually break. As the fundamentals continue to deteriorate, the credibility of each BOJ defense declines, and we should see faster and faster recoveries after each intervention.
If I were the BOJ, I would buy yen much more aggressively and force USDJPY to trade below 150 for a few days. This would create realized losses for market participants holding USDJPY longs. It would devastate global markets in the ST, but it could also bury the other side. Once the technicals turn in the BOJ's favor, algos will join the BOJ's side as well. That would be a better use of reserves than simply buying when USDJPY grinds back toward 157-158, which would drain reserves more quickly.

There are only two things that can truly turn the yen higher:
1) a sharp and sustained decline in oil prices
2) BOJ rate hikes

Japan has almost no control over the first one. If the Iran war drags on, we will likely see the BOJ forced to hike, and the resulting carry-trade unwind would be devastating for global risk assets.

Speaking of rates, it is also worth noting that global long-end yields are rising rapidly and synchronously, as we had expected. That is not a good sign.

JP30Y Speaking of rates, it is also worth noting that global long-end yields, including JP30Y (Japan 30-Year Yield), are rising rapidly and synchronously, as I expected. That is not a good sign.

NVDA I shorted NVDA (Nvidia) on Monday around the HOD but was stopped out at breakeven. As I noted in last week's Tactical Positioning, I expected this push to a new ATH to be nongenuine, and the ATH area would be a textbook short entry. NVDA printed a new ATH on Monday but closed the week in the red, while semis and NDX closed in the green. For bulls, 196 must hold; otherwise, it risks another probe into the 167 area.

USDJPY

USDJPY Historically, Japan's FX interventions tend to come in waves, not as one-off events. If April 30 was indeed intervention, more operations may follow. We outline the repercussions of such intervention in the chart below.