The Chinese equity market rose a touch overnight. The offshore dollar/yuan rose a touch. Gold in yuan spiked up to a new all-timer overnight and then reversed to end down a percent and did so similarly in most other major currencies as well.

Elsewhere in Asia, Hong Kong rose a percent. Japanese equities fell a touch. JGB yields rose 3 bps to 1.30%. The dol/yen bounced nearly a percent.

European equity markets were up half a percent this morning. German 10yr yields fell 4 bps to 2.44%. The eur/dol slumped a percent. The swissy fell over a percent.

Over in the US, the equity futures were up a percent ahead of the open for no particular reason, although there was chatter that the White House might announce a trade deal soon. The dollar was firmer vs. other paper. Gold had spiked up to $3500 overnight but had then reversed to a gain of only about $25 at $3450ish. Yields were a little lower.

The S&Ps opened up about a percent and began moving higher. Then around mid-morning a headline hit that Treasury Secretary Bessent had said in a closed door investment conference meeting that the current trade situation with China was unsustainable and that some sort of deal will eventually be made.

On the back of this headline, the S&Ps squirted up to a new high for the day and to a gain of nearly 3 percent. The dollar also interestingly rallied, and gold slumped back below $3400.

As people then began reading the rest of Bessent's comments, which were all reported third hand, phrases like "long slog" and comparing the trade situation at present to an "embargo" seemed to be the proximate cause for the S&Ps to then reverse and retrace most of the gains since the open. Gold also then rebounded back above $3400 briefly before reversing to the downside again as the dollar continued to rally.

The S&Ps began rallying again around noon and eventually recovered back up to near the highs of the day to go out near the earlier highs with a gain of over 2.5 percent.

Volume was light again. Breadth was nearly 10 to 1 positive on the NYSE and nearly 4 to 1 positive on the NASDAQ. New highs edged out new lows on the NYSE (23 to 13), and new lows edged out new highs on the NASDAQ (77 to 49).

Stocks Were Higher:

Stocks were higher across the board in no particular pattern.

The XHB homebuilding ETF bounced 4 percent, and BLDR bounced 2 percent too.

Positions: I left my shorts unchanged in SPY, QQQ, MDY, IWM, ARKK, XHB, and BLDR.

Commodities Were Mixed:

Brent crude rose over a percent. Natural gas fell over a percent. The oil stocks were higher, with the oil and gas ETFs all picking up a percent or two. The uranium equities were higher too, with the URNM a touch.

Copper popped nearly 3 percent to a new high for the move since the low. Other base metals were higher, with the DBB base metals ETF adding over a percent. The copper stocks were higher, with the COPX picking up 3 percent. The steel stocks were higher, with the SLX adding 3 percent. The XME metals and mining ETF rose over a percent.

Palladium fell nearly a percent, and platinum also fell nearly a percent.

Silver slumped half a percent.

The SLV/GLD ratio rose half a percent from yesterday's new 52-week low.

The CCI equal-weighted commodity index ETF (GCC) rose half a percent to a new high for the move since its low but I suspect this is going to set up for a retest of the low very soon. The energy-heavy DBC commodity ETF rose half a percent. The Bloomberg Commodity Index (DJP) rose a freckle.

Gold Reversed:

Spot gold ripped overnight for no particular reason and rallied about $75 up to nearly exactly $3500.

From that high it then reversed and began to slide. By the time the metal opened in the US, it was still up $25 at around $3450, but as the dollar began to rally, the metal would begin to slip and would eventually tumble into negative territory when Bessent began mumbling about a deal with China.

After hitting a low of $3373 for a loss of nearly $50, the metal bounced back up to just over $3400 as the S&Ps slipped on the additional headlines from Bessent about the fact that there would be no quick deal (which I think was obvious to anyone with an IQ over 5).

As the dollar continued to rally, however, the metal rolled back over and slumped to a marginal new low for the day and to as low as $3366 before a bounce into the equity close would send it out at $3379 for a loss of over a percent.

Gold Stocks Slipped:

The GDX opened down near yesterday's low and proceeded to slide pretty much all day to end near the lows with a loss of nearly 3 percent. Volume was chunky, and that close put the GDX below the 5 dma for the first time since April 8th, which means the bears are back in charge in the short run.

The GDX/GLD ratio slumped over a percent.

The silver stocks were lower inline with the gold names. The SIL fell over 2 percent. The SILJ fell over 3 percent, and the GDXJ fell nearly 4 percent.

Real yields were lower, and nominal yields were little changed. The yield curve flattened per the 2/10 spread. The dollar was firmer for a change, although gold was down in all the major foreign currencies as well.

Gold's reversal today from the highs was a little over $100, so it was fairly substantial. Likewise, the GLD gold ETF put in an outside day key reversal (opened at a new all-time high and then reversed to close below the prior day's low), which is a technical reversal with a fairly high probability of leading to a slide in the coming days (but no guarantee). It also took place on what looks like record volume for the GLD ETF.

When combined with the GDX closing below the 5 dma, it makes for a fairly high probability of a some sort of end to the parabolic blowoff that we've seen over the past two weeks. But again, that's just a probability and not a guarantee.

Even if we have seen some sort of top, I don't think it's a top on par with the one we saw in August of 2020, where it remained a peak for years even though the action is arguably similar in its parabolic nature recently.

And besides, we don't even know yet if we've seen a top. If gold recovers and rips again overnight, today will have just been another pause to refresh before things get even wilder.

These comments by Bessent are a nothing burger in reality, but as is always the case, if gold exhausted to the upside in the short run, then any excuse will serve to cause a correction.

My gold model backed off from a Trifecta SELL to a Tier 1 SELL today, and one could argue that today's decline is confirmation of the signal. However, I'd like to see another down day tomorrow before saying for sure that we've had confirmation.

Positions: Per my Intraday Comments, I bought GDXD on the open this morning and shorted June gold at $3460. Long SLV 29 puts for tomorrow.

The Dollar Was Firmer:

The dollar finally rallied vs. other paper. The dollar index jumped over a percent from yesterday's new 52-week low. If there is a wild bounce in the dollar, a rebound back up to the 200 dma seems like a likely target.

THE BTC ETF (IBIT) jumped 5 percent and took out its downtrend. MSTR, COIN, RIOT and other BTC derivatives were all higher.

Positions: Long IBIT.

Treasury Yields Were Little Changed:

Treasury yields fell 2 bps in the long end, which left the 10yr yield at 4.40%.

The 2/10 spread narrowed from yesterday's new 52-week high. As the curve steepens after being inverted for an extended period of time, we typically start to see things go awry in the equity market ahead of a recession (like we are now). That will bring on Fed easing eventually, which is what gold wants, but not just yet.

Yields in the Fed sensitive 2yr rose 5 bps to 3.82%. Junk debt bounced, with the HYG adding a third of a percent. LQD, which is the investment grade corp bond ETF, rose a touch. MUB, the muni ETF, rose a touch too.

To Sum Things Up:

The administration seems to be trying its hardest engineer a rally in stocks without actually doing anything given these comments from Bessent today. On top of that, just after the close Trump said he had no intention of firing PowPow, which triggered another rally in the S&Ps. Again, I don't think that's a surprise. He wants to keep him around as a scapegoat for the coming recession.

I don't know how much upside in stocks can be "engineered" by a bunch of happy talk from the White House, but the fact remains that the equity market has been damaged and with no new monetary stimulus from the Fed to paper over that damage, the direction is down. And because the stock market is far larger than the real economy, it will push (or already has pushed) the real economy into a recession.

Let's be careful out there...

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