Retail is now 90% long USOil which is due to its heavy drop in price this week. Falling oil prices could be a result of it being an election year, so I would not bank on oil seeing heavy upside this year. The indices are majority shorted by retail which is another sign for bullishness in stocks for now.

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Jobs data was perceived as bullish this morning as May added more jobs than expected although last month was revised lower by 10K. Unemployment also ticked up to 4% for the first time in two years with a slight increase in wages. Higher wages may also indicate that we could be looking at higher inflation in next week's CPI report. There is almost no fear in the market right now even with many metrics indicating an economic slowdown. The hype around an interest rate cut is still in play.

The S&P broke out of a falling wedge and is now at all time highs. It's hard to say how much further the market will move, and every dip continues to get bought back up. Sellers have not appropriately stepped in yet, so we may continue to see dip buying opportunities in the near future. -Frank

Gold reacted negatively to the labor data this morning possibly due to the fact that NFP was higher. Maybe gold traders are not confident in a rate cut after seeing a "resilient" jobs market. The two year yield is higher today which also indicates a lack of confidence on the rate cuts. Gold is now on support on the 1D timeframe and is looking to possibly test back under the $2,300 level on support. -Frank

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Wednesday
🗓 8:30 AM EST: USD CPI
🗓 2:00 PM EST: FOMC

Thursday
🗓 8:30 AM EST: PPI & Unemployment

Friday
🗓 10:00 AM EST: Prelim UoM Consumer Sentiment

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The 10 year treasury bond is bullish at +7, our most bullish asset on the EdgeFinder. The reason bond prices are in demand is due to the expectations of lower bond yields in the future. Lower yields means higher prices.

Investors are not expecting rates to go higher now that the Fed talks more about cutting than hiking. The next likely move from the Fed will be to lower interest rates, thus propelling bond prices. If we want to see a more expensive 10 year bond, we probably want to see lower inflation.
-Frank

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The demand for gold remained mostly unchanged from last week's COT. Price crumbled on Friday on better than expected NFP. However, with an uptick in unemployment to 4%, the US has not seen this level for a few years. Once we hit this threshold, finding a job becomes increasingly harder for women and minorities.

Price hit support and may be trying to bounce from the lows after a 3% drop Friday. For this week, we are going to need to see worse economic projections from FOMC and lower CPI. The reason lower inflation is bullish is because it can prompt the Fed to cut. Higher or sticky inflation will only delay the rate cut and continue to put pressure on the metal's demand. -Frank

EURUSD is no longer a strong bullish score on the EdgeFinder and is now hovering around neutral. The US economy is performing better than the EU, and ECB cut their interest rate out of concern for the economy.

Depending on the CPI data, FOMC may take a more hawkish stance if inflation remains sticky. If CPI moves lower, investors may become very excited for a rate cut in September. So, a lower CPI could be bullish EURUSD and a higher CPI may be bearish. -Frank

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Adding to the overall market indecisiveness, retail is strongly short biased against the S&P at over 70% short. NAS is also majority short, and Dow Jones is mixed.

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The reason for this confusion couples with the fact that COT is also short this week on the indices. US30 and SPX are the largest changes to the short side. This may suggest that no one knows where the market is heading for now. This week will definitely provide a clearer picture on smart money sentiment, but there is so much uncertainty that it is hard for me to guess where I think indices, gold and dollar are headed in the short term.
-Frank

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S&P500
Although the market has hit a consolidation zone and technicals point to being overbought, we can’t pull a continuation of the rally off the table quite yet. Unlike most assets, the stock market tends to trend upward until a fundamental crack in the economy’s infrastructure. With CPI tomorrow and the Fed’s forecasted projection of the economy and interest rates, we have to consider another melt up if inflation numbers come in cooler. There is also long term support on the rising trend line on the 1D timeframe should price retrace. -Frank

Gold
Gold rises at the market open as stocks fall. Investors are still trying to figure out which asset would work best against the dollar as we expect lower inflation data tomorrow. Regardless of why the Fed may cut rates this year, it will still be a bullish sign for gold as it means a weaker dollar. However, if CPI runs hotter than expected, rates will have to stay higher for longer which could hurt gold’s price over time.
-Frank

EUR/USD
After the ECB’s rate cut, the euro might be much weaker than the dollar now. This is because the US still fears that we might not get a cut this year while Europe’s monetary policy becomes looser. The pair is now on support on a falling trend line and may have to test the lows again. If CPI is higher, we might be looking at a bearish EU pair.
-Frank

Cooler CPI numbers across the board... probably going to be weaker dollar with strong indices and gold

Yields seem to be capped now that we are looking for that September rate cut to happen. Lower CPI is a good indication that today's FOMC will lean dovish as higher rate fears are subsiding. Despite a slowing job market, a cooler inflation number is what investors are looking for. In other words, as long as CPI is coming down with labor, it's a good sign. Stagflation is not a concern right now. -Frank

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