Becalmed markets around the world appear to paused in time for a breakout on any positive signal from the “historic” Singapore summit between President Donald Trump and Kim Jong Un.
Markets from stocks, bonds, gold, oil and crypto are all poised at significant levels. The S&P 500 is retesting the 2,800 resistance level, currently at $2,785; the Dow Jones Industrial on Monday bounced off resistance at 25,400 and is sitting around 25,320; brent oil is at knocking on $80 a barrel at $76; and the dollar index is 93.6, just below the long-term resistance of 94.
From the point of both leaders bragging about their “nuclear buttons” and Trump teasing that he had “a bigger nuclear button”, global markets have been whipsawed again and again by the president’s petulant tweets, though he has been quick to attribute the stock market rally up to all-time highs to his tenure as president, dubbed the ‘Trump bump’. As we’ve noted before, Trump’s more controversial and adversarial tweets have also coincided with jumps in the price of bitcoin, almost like a flight of capital from USD.
In the past 90 days the price of the major cryptos have had a light correlation with the S&P 500. Asian markets all opened up marginally higher on Tuesday giving a positive lead for the US open.
The bellweather of the crypto market, bitcoin, is testing support around $6,700 where it also bounced off in February and March, with the next potential support below that being $5,700.
Volume in bitcoin transactions has been in a long decline, though due to the rout in the altcoin market in the past few days the strength of BTC and its market volume proportional to the alts has picked up, its volume now accounting for close to 40% of the overall market.
The CBOE Volatility Index (VIX) has again pushed back down to near historic lows at 12, down from the 50 high-water mark after the vol shock in February. Given the interaction between the VIX and stocks and crypto, largely inversely correlated, and the correlation between Trump’s tweets and the stock market, we could see the stock market providing the lead in direction for BTC.
The markets hang in the balance of Trump’s caprices and as we noted before, bitcoin has appeared to benefit from the more adversarial tweets and pronouncements that have typically been negative for stock markets overall.
There’s still time…
If Trump’s bombastic performance at the G7 summit that just ended in Canada is anything to go by, he could still turn the imperialist tone up to 11 with Kim. If he can justify calling the leader of Canada Justin Trudeau (one of the closest US allies and its biggest trading partner) “dishonest and weak” after Trudeau disagreed with trade tariffs then Little Rocket Man will have to be careful he doesn’t say the wrong thing.
As the President’s trade advisor Peter Navarro went as far as to say, “there’s a special place in hell for any foreign leader that engages in bad-faith diplomacy with President Donald J Trump and then tries to stab him in the back on the way out the door.”