The S&P 500 had its worst trading day since January, losing 1.2%. The Dow and NASDAQ also tumbled, and for the first time in a while, US equity markets closed the week in the red. The S&P 500 was down 1.6%, the Dow lost 2.5%, and the Nasdaq fell by 0.6%.  This week, more Q1 earnings will be reported as the quarterly reporting season gets fully underway. In leading the way, JPMorgan announced its earnings Friday. Although its earnings were better than expected, the bank commented that high-interest rates had negatively impacted its net interest rate returns.  This week, we see earnings from Goldman Sachs, Bank of America, J&G, Netflix, Morgan Stanley, Blackstone, American Express, and P+G, which should give us a good idea of the state of the health of corporate America. Gold in the trading session notched up another record of $2410oz and then suffered a massive sell-off as lucky traders booked profits and some took on short positions, as many are still confused with why the market has ever traded to these levels. Over the weekend, dozens of Iranian drones and missiles were launched against Israel from Iran, Iraq, Syria and Yemen in retaliation for the Israeli air raid on Tehran’s consulate in Damascus. The crisis in the Middle East has reached another stage.

But first to earnings in the US. Amidst the backdrop of market volatility, we are closely monitoring the ongoing earnings season for insights into the health of corporate America. With more companies set to report their Q1 earnings, including heavyweights like Goldman Sachs, Bank of America, Netflix, and American Express, market participants are keen to assess the impact of various factors, such as rising interest rates, on corporate profitability and outlooks as a result.

JPMorgan's recent earnings announcement provided some initial insights into the financial sector's challenges. The bank said first-quarter profit rose 6% to $13.42 billion, or $4.44 per share, from a year earlier, boosted by its takeover last year of First Republic during the regional banking crisis. However, in guidance for 2024, the bank said it expected net interest income of around $90 billion, which is essentially unchanged from its previous forecast.

That appeared to disappoint investors, some of whom expected JPMorgan to raise its guidance by $2 billion to $3 billion for the year. Shares of JPMorgan fell more than 6%. The key question is: Are we expected to see more of the same from the other banks when they report next week, and will this recent negative price action start a trend, especially when last week's inflation data and resurgence in energy inflation (the first month of growth since Feb 2023) suggested rates will remain elevated for some time to come? We suggest more bearish days to come.

Geopolitical tensions in the Middle East have escalated over the weekend, adding to the oil market's uncertainty and risk aversion action. Reports indicate that dozens of Iranian drones and missiles were launched against Israel from multiple locations, including Iran, Iraq, Syria, and Yemen, in retaliation for an Israeli air raid on Tehran's consulate in Damascus. The unfolding crisis underscores the fragility of geopolitical stability in the region and the potential ramifications for global security and economic stability. Comments from the US heavyweights, Blinken and Austin suggest that the US has no interest in any escalation with Iran. To that point, Iran also issued a statement saying that its attack was in retaliation and that this has concluded.   The key will be how Israel will perceive this and how Netanyahu wants to play it, as it would be a great distraction from the continued assaults in Palestine, the lack of progress on hostage negotiations and his recent unpopularity with Western allies with the Gaza conflict dragging out.  We expect oil prices to remain elevated as a result and see the potential for a resurgence in energy inflation, which will keep the Federals Reserve on the back foot when looking to ease monetary policy. Perhaps all the above will also give credence to Gold's move after the sell-off on Friday.

Gold, often viewed as a safe-haven asset during times of uncertainty, experienced a volatile trading session characterized by both record highs and a subsequent sharp sell-off. The precious metal surged to a new peak of $2410 per ounce before encountering heavy selling pressure as traders sought to capitalize on profits and initiate short positions. The sudden reversal in gold prices reflects lingering uncertainty and confusion among market participants regarding the underlying drivers behind the recent rally to unprecedented levels but suspect at the moment that it has more to do with the nexus between it and the USD, which is surging as a result of the escalation in the Middle East.

This week, investors will closely follow corporate updates in the US as this potential will see the selloff in equities continue if they do not stack up. Additionally, in the US, retail sales figures and speeches by Federal Reserve officials will be of keen interest, but we feel that rate reductions are off the agenda for the time being. Globally, China is set to release Q3 GDP growth rate, industrial production, retail sales, house prices, and fixed asset investments. This will be widely watched as a key to the demand picture for inputs like iron ore and copper. Iron ore has suffered a dramatic fall as a result of weaker economic outlook for China. In the UK, markets will follow inflation, unemployment, and retail sales. Also, consumer price data will be published for Canada, New Zealand, South Africa, and Japan. Ae about to get a resurgence of inflation?

On the position front, we remain … in the S+P (5203), and we added … at 5232, so the position looks good. We are still … USD/JPY at 147.36 and looking for another entry point. Our timing was not the best on this trade. In the other currencies, we are still …, both the AUD/USD (US0.6770) and AUS/CHF (0.5707). With the surging USD, we lost some of the AUD. We are looking for another entry point in the gold market as we … our positions too soon. We returned to the silver market at USD 24.95 and have … our position at a reasonable profit.

Trade Focus:

Fundamentals:

USD: The USD has been bid for the last few trading sessions. The currency hit a five-month high on Friday as the prospects for interest rate reductions have eased …

Technical Analysis:

The USD is trading into resistance, and weekly and daily momentum indicators are on their highs, suggesting that the USD needs to …

Support              …

Resistance         …

Momentum        …