Weekly game plan

S&P 500 delivered more gains to end the week, regardless of popping up non-confirmations. These bearish divergencies can go on for longer than generally deemed possible – but that doesn‘t rule out rug pull(s) here and there. That‘s analogical to almost every rising wedge facing a breakdown sooner or later.

That‘s why keeping the finger on the pulse is so important – and Friday brought very decent jobs data (as per my bias announced to clients before the event) coupled with prior revisions higher that were (correctly) interpreted as strong US economy (good for the consumer, I like latest consumer confidence data too), and these didn‘t send yields rising (more expectations of Fed rate cutting even as we‘re at the very end of the disinflationary times).

Given though very recent Powell positive mention of Bitcoin, it‘s not that hard to imagine rates would be cut with the declining oil and gas prices fig leaf, no matter disinflation being long in the tooth and manufacturing approaching expansionary territory finally. It‘s though rising yields that would ultimately extinguish the soon-to-be apparent economic acceleration – for now, low and declining oil prices serve as a cushion, and stimulus to the consumer and businesses (it‘s almost as a rate cut except that the Fed can‘t print barrels of oil). Other supportive data of good Q1 2025 for the real economy, is auto sales rising and optimistic consumer sentiment translating into retail sales.

What‘s that going to do to yields, dollar and industrials?

Crude Oil

Oil proved it wasn‘t trading with a bullish bias – truly an understatement, and the lows aren‘t yet in. The $65.50 - $67 area though has served since Sep as reliable support, so I‘m not looking for it to break anyhow fast or soon. The fact there is little accumulation at these $67 levels, is though a warning sign to those automatically buying at support in the hopes of another push to $70 – the risks are for now still skewed to the downside.

Copper

Copper chart is a tad more constructive than the oil one, yet the stiff headwinds for the red metal (China hopes and situation on the ground), are obvious here too. It‘s been agrifoods that had kept commodities (CRB index) up – not base metals or oil – and for all the Trump peace hopes, I think markets, economists and polithologists are underestimating the risk of geopolitical escalation in 2025. A breakdown from the lengthy bearish flag approximating pattern, combined with solid bid emerging, would be a good long entry for copper (here, the risks are skewed to the downside rather than towards overcoming $4.30).