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What a Week It Was...

Last week offered some confusing market action with excellent earnings failing to get stocks to rally on fears for higher interest rates, rising bond yields (10 y Treasury yields breached 3% at some point), rising inflation and fading growth optimism (Q1 first estimate of US GDP came in weaker than expected an durable goods orders ex defense and aircraft were negative). US Stocks were saved by Facebook and Amazon on Thursday and Friday which were among a narrow list of shares managing to go up on better than expected results. We would not pay 250 times earnings now for Amazon (or its booming cloud business...). Neither do we buy the hypocrite FB narrative or the FB chart that still looks vulnerable to us. Such a narrow line of defense may not hold the tape together for much longer. The dollar rally was interrupted on Friday following weaker than expected Q1GDP. 10-year Treasuries ebbed back to 1.96%. Gold selloff was interrupted as well and cross asset correlation is solidly on the rise which means “risk parity” funds might go through a soft patch again. The COT report showed some long EUR liquidation, a total absence in speculative activity in USDJPY and a reduction in MXN net longs, based on political fears. Looking at the VIX structure, complacency still reigns, and more early warning signals are inviting us to caution with the continued poor behavior of the smart flow indicator (driving people to sell more towards the close than they buy at the opening) in our Confidometer and approaching death crosses on the major averages. Let’s wait to see what next week brings with Apple’s results, a Fed meeting, a US job report, local UK conservative party elections... and likely further surprises from D. Trump (perhaps French President Macron will not find his displays of physical affection for D. Trump’s that helpful...and German Chancellor A. Merkel will not find much rewards in getting to grab D. Trump’s handshake this time (D. Trump had refused to shake her hand at the last visit). “Little rocket man” as he was punned by D. Trump a few months ago seems smart enough to wish to wish to become D. Trump’s new friend and save his regime by setting the US President in a pool position to receive ... a Nobel Peace prize. Kim told South Korea’s Moon over the week end that he “isn’t the type of person” to use nuclear weapons, and that he had no reason to “live in difficulties” because of his arsenal if he can build trust with the US, South Korean presidential spokesperson told reporters on Sunday. After the US close…

S&P +4points overnight Over the week end, leaders of Germany and the UK joined French President Macron in a last effort to keep the nuclear deal with Iran alive despite Trump administration’s threat to pull out of it within two weeks. Italy has further insisted it is opposed to additional sanctions against Iran. The nuclear deal has so far been honored to everyone’s satisfaction but to Washington’s chagrin. It will likely make no difference to D. Trump for whom the local political agenda (favorable to a pull out) likely dominates all other considerations. In the meantime, tensions are building between Israel and Iran. 

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