Weekly Macro Note: The 200SMA, Latest War Developments, Jet Fuel Price Shock and Impact, Portfolio Strategy Update
In this Weekly Macro Note - we discuss the '200sma magnet', highlight the latest war developments over the last 24 hours, talk about the jet fuel price shock and it's impact, and much more.
Don Johnson (@DonMiami3), Chief Economist
Good Sunday evening MacroEdge Readers & Community,
It’s been an incredible few days in southwest Utah - and it looks like that will continue this week. I spent two days getting in all the hikes I could - and did about 16 miles yesterday and about 12 today. The views & people are both spectacular, and I highly suggest a visit here for those that can make it to this part of the country, there’s really no place like it in the world.
This evening we have tepid futures open (thus far), though I don’t think it matters now until we get past Tuesday evening and the next Trump deadline. The creative ‘tee-ups’ for deadlines further out in the future signal, in my opinion, that we’re unlikely to really see Trump follow through on that particular escalation - in this case, being an expansion of infrastructure (energy and bridge attacks), given what the response would be. If we do see them carried out, that would be a signal to energy markets in particular that prices on the front-end are again too low, and they would be repriced higher.
Generally, it seems like we’re already starting to see some headline fatigue from market participants, which is the absolute goal of the ‘flood the zone’ news releases, where one can’t really discern what is happening. In terms of war developments over the last 24 hours - or from our Saturday Macro Note - there hasn’t been much in the way of any dramatic changes, and I expect the President to remain largely quiet now until that new Tuesday evening deadline. Tomorrow we’ll also have a press conference on the war - but I expect the announcement to remain largely concentrated on the rescue operation that took place over the weekend. It doesn’t seem like right now $112/bbl spot US crude is enough reason to take markets lower - and a key reason for that in my eyes is a retest of that key 200dma (which we highlight again below).
On the data front - outside of the war and geopolitical updates - this is quite a quiet week, and I expect that we see continued moves to push paper oil prices lower through announcements, the ‘TACO’ publications, and more. What’s very interesting at this point in the price shock is that it really doesn’t seem like the median consumer is particularly bothered by it yet, though impacts on the physical supply front are going to get a lot more precarious 8-12 days in Europe, and the following week in the United States. For the March CPI reading, that is not likely to capture much of the energy surge we’ve seen yet, though come April and May - as highlighted last night - it will trickle into things like food prices, and everything else in the economy that is reliant on petroleum products in any way, shape, or form.
The market right now is operating with intense recency bias and an overall mood of ‘coping’ from the 6-8 months of sideways action across the indices, so I think turning on those filters for the lineup of CNBC guests that will be coming on this week, one after the other, is probably warranted. Another key development that I expect to see in the coming week is a pivot to an ‘attack during open markets’ strategy from Iran, as their politicians have frequently taken note of how quickly it warrants a response from Trump. Whether or not that remains feasible remains to be seen, but the latest estimates still highlight the IRGC having access to over 1,000 IRBMs and plenty of drones to match. There’s so much more I want to discuss from a shifting global power dynamics perspective as well, with how enormous the Strait of Hormuz situation has been on those shifts - but that is something that I will save for a rant in the Redeye Macro Note at the end of the week, as I head back to Phoenix for a few days.
The schedule at the bottom of the Weekly Macro Note includes everything we’ll be covering this week across the next 4 reports, and in 2 of them we’ll also highlight The Macro Club and how to get involved there as we use the next two months to set up the foundation for it.
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The ‘short-term’ chart of the evening, a positive technical setup is once again developing on spot crude:
The Macro Week Ahead
Some exchanges are closed tomorrow for Easter Monday.
Monday: ISM Services PMI
Tuesday: RBNZ Interest Rate Decision, Fed Speaker Goolsbee
Wednesday: FOMC Minutes, EIA Inventory Data
Thursday: Delta Airlines Earnings (important macro bellwether for aviation)
Friday: CPI, UMich Prelim Sentiment, and Prices Readings
The Masters Golf Tournament will take place towards the end of the week, which is another reason for volume to trickle off as the week winds down.
The 200DMA Magnet
In any distributive environment that breaks lower, we historically see a retest of a range around the 200sma point from the initial breakdown. In this case, we have not seen that rebound yet, though it is looking likely that it will be tested at some point in the next couple of days - assuming that something major doesn’t come along in the next 48 hours. The market is programmed to look for reasons to go higher right now, so anything that can be taken as positive news will be right now.
This very short-term uptrend (on the 4hr) has taken the Nasdaq higher over the last few sessions, and is continuing overnight with about a .4% gain on NQ. I would take anything with a grain of salt until the President provides the next updates to action in Iran, given the situation with the Strait of Hormuz.
It might seem bizarre that investors are just eagerly awaiting to rush back into unprofitable tech garbage and AI names - but the recency bias from the 2024 and 2025 gains remains very strong, and adoption of those technologies continues, even though that adoption has been priced into names like Nvidia.
Latest Israel-Iran Developments
There is so much noise and fake news going around right now that it’s hard to even filter or discern out what’s real and what’s not. The more noise we see, the more confident I get that there is concern about what’s going on in the broader macro picture, in things like private credit, and what will happen as a result of the energy shock. The key difference in the economy is now that there isn’t a printer turned on (at least yet), and most households are completely unprepared for an additional wave of higher prices, and another bout of job cuts as they happen.
(Continued below (latest Israel-Iran developments, energy strategy, the impact of the jet fuel shock on airlines, what’s ahead this week, and portfolio strategy update & commentary from Six)…
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