The Chinese equity market fell a freckle overnight. The offshore dollar/yuan rose a touch. Gold in yuan was flat.

Elsewhere in Asia, Hong Kong fell a third of a percent. Japanese equities rose half a percent. JGB yields rose 1 bp to 1.47%. The dol/yen rose a touch after the BOJ did zip overnight.

European equity markets were off a percent or so this morning. German 10yr yields fell 3 bps to 2.52%. The eur/dol fell half a percent and is sporting a bearish RSI divergence, which is the mirror image of the DXY's bullish RSI divergence.

Over in the US, the equity futures were off half a percent after Trump initially indicated overnight that he wanted a deal with Iran but then later changed his language to sound more open to the US joining the fight. The dollar was very firm vs. other colored paper. Gold was off a couple bucks. Crude oil was up 3 percent, and yields were lower.

Before the open, we got the May retail sales data and learned that sales fell 0.9 percent, which was worse than the -0.6 percent consensus. Nevertheless, the markets mostly yawned, with the dollar even firming on the news as gold slipped.

The S&Ps opened down about half a percent and chopped sideways until around noon when Trump "tweeted" that Iran needed to unconditionally surrender and that the location of Iran's Supreme Leader was known. Chatter also ensued that the US would potentially enter the war as Trump met with his security council around the same time.

The S&Ps responded by slipping to new lows for the day over the next couple hours as Brent crude firmed back up to just under $76. Gold interestingly merely flopped and chopped around the unchanged mark as the dollar soared.

After hitting a low with a loss of about a percent, the S&Ps proceeded to chop sideways near the lows for the remaining couple hours of the day to go out with a loss of nearly a percent.

Volume was above the 60 day average again. Breadth was over 2 to 1 negative on NYSE and over 2 to 1 negative on the NASDAQ. New lows edged out new highs on the NYSE (51 to 39), and new lows edged out new highs on the NASDAQ (115 to 95).

Stocks Were Lower:

Stocks were mostly lower in no particular pattern.

The XHB homebuilding ETF fell over 2 percent, and BLDR fell over 3 percent.

Positions: I made no changes to my shorts in SPY, QQQ, MDY, IWM, ARKK, XHB, and BLDR.

Commodities Were Mixed:

Brent crude popped 6 percent and back up to just shy of the highs that were hit on Friday and Sunday night. Natural gas jumped over 3 percent. The oil stocks were higher, with the oil and gas ETFs all picking up about a percent to a new high for the move. The uranium equities were higher again, with the URNM adding a touch.

Copper slipped half a percent. Other base metals were mixed, with the DBB base metals ETF ending unchanged. The copper stocks were lower, with the COPX losing over a percent. The steel stocks were lower, with the SLX losing half a percent. The XME metals and mining ETF rose a percent.

Palladium rose over a percent. Platinum rose 2 percent but still remains below last week's high, which may have marked a short-term top last week along with silver.

Silver popped overnight and took out last week's high to trade up to as high as just over $37, which is roughly where it closed at a new multiyear high for a gain of 2 percent.

The silver/gold ratio surged 2 percent to just shy of last week's high and the downtrend since 2024.

The CCI equal-weighted commodity index ETF (GCC) rose a touch to a new multiyear high. The energy-heavy DBC commodity ETF rose over 2 percent. The Bloomberg Commodity Index (DJP) rose over a percent.

Gold Treaded Water:

Spot gold bounced around between $3400 and $3375 overnight, and other than a brief dip to as low as $3367 during the US session as the dollar ripped higher, the metal basically remained in that same range throughout the US session as well and didn't seem to react to either the rally in crude or the threats from Trump. For the equity close, the metal woudl go out at roughly $3988 for a gain of a freckle.

Gold Stocks Were Mixed:

The GDX opened down and quickly collapsed to below the 5 dma and nearly to the 10 dma before then rebounding back up to a loss of only a touch, where it would chop sideways for the rest of the day to go out near the middle of the day's range with a loss of a hair. Nevertheless, the GDX once again closed above the 5 dma, which leaves the bulls in charge.

The GDX/GLD ratio fell a touch.

The silver stocks were mixed inline with the gold names. The SIL rose half a percent but nowhere near a new high like silver. The SILJ rose a percent but also nowhere near a new high like silver. The GDXJ rose a hair.

Real yields were lower, and nominal yields were lower too. The yield curve flattened per the 2/10 spread and attacked its uptrend since December. The dollar was very firm vs. other paper, which appears to merely be a function of the market being too short for the time being.

Trump sent conflicting messages over the past 24 hours that at first indicated he wanted a truce and some sort of nuclear deal to then saying the time for talking was over, which suggests he might order US forces to join in the fight? Or is all that bluster just a scare tactic to bring Iran to the table?

I have no insight into Trump's thought process, but if the US does bomb Iran's remaining nuclear sites, I suspect that would be a "conflict ending" event. Granted, Iran may fire off a few missiles at US bases in retaliation, but basically, Israel's objectives will be met at that point. And for all intents and purposes, the war will be over.

Chatter out of Israel suggests that the US may send bombers to attack Iran's nuclear facilities as soon as tonight, but who knows?

As you can see above, I just spent three paragraphs discussing whether the US will drop some bombs or not amidst what is supposed to be a discussion of gold and silver. But sadly, that's where we are. I'm honestly a little stunned once again that gold failed to trade up today given all the chatter and the bounce in crude. Consider that last week gold rallied about $40 the day before Israel launched its attack. So, is gold telling us that either nothing is going to happen? Or, if the US does join the fight to finish off Iran's nuclear sites, will it essentially mark the end of hostilities?

I wish I knew, but gold acts heavy in light of all the above no matter what you think in my view. Thus, it may be prone to a continued correction down to potentially the 50 dma, and that goes for the GDX as well.

Silver, on the other hand, finally took off overnight, but the move was a little underwhelming. Consequently, silver could still be setting up for a correction to retest its breakout from above if gold comes in and the dollar continues to bounce.

I almost forgot that we have an FOMC meeting tomorrow. I don't expect any surprises from the FOMC, and PowPow will straddle the fence between the risk of inflation and the risk of slower growth during his presser. The only possible surprise might come in the "dot plot" if the expected two rate cuts in 2025 changes at all.

My gold model remained at neutral.

Positions: Long GLD 309 and 306 puts for Wed's expir. I also punted my 32.5 SLV puts for pennies this morning and bought 33s for Wed for 7 cents. I also bought some GDXD, which I hung onto for the close even though I'm not too keen on being short gold stocks when the GDX closes above the 5 dma.

The Dollar Was Very Firm:

The dollar was very strong vs. other paper for no particular reason. The dollar index surged over half a percent and may be about to attack its near-term downtrend amidst what may be a short squeeze in the short run.

"The" BTC ETF (IBIT) fell 4 percent but clung to the bottom of its compression triangle on the charts by a nose. MSTR, COIN, RIOT and other BTC derivatives were all lower.

Positions: Long IBIT (last add was to double the position on April 4th at 47.03).

Treasury Yields Were Lower:

Treasury yields fell 6 bps in the long end, which left the 10yr yield at 4.39%.

The 2/10 spread narrowed and attacked its uptrend since December. 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 fell 2 bps to 3.95%. Junk debt slipped, with the HYG losing a touch. LQD, which is the investment grade corp bond ETF, rose a touch. MUB, the muni ETF, rose a hair.

To Sum Things Up:

Today's action was just as bizarre as yesterday's in light of the events that continue to unfold? I don't know what is going to happen in Iran, but it's a sure bet that somebody does know. And like last week, they've already positioned accordingly. All we can do is wait and see and then watch the reaction.

Let's be careful out there...

REMAIN FLEXIBLE