Markets are still in "Trump trade" mode, reacting instantaneously to his each and every comment.
Yesterday, it was about the too strong US$/Euro and Trump's meeting with the pharma industry.
I do not believe that Trump is as powerful as the Fed regarding interest rates and currencies, but for sure, his meeting with pharma CEO's was a good pretext for launching a short squeeze on the sector.
Trump wants pharma jobs back and prices down and the pharma industry essentially promised to play ball on jobs if taxes and FDA regulations come down. Nothing was said about drug prices, though. I suspect this meeting will drastically slow down Trump's negative comments about the sector. Hence, this is a positive.
On the currency front, I am somewhat puzzled by yesterday's action: Trump's comments should not have the power to move rates, because he does not have the tools to influence exchange rates. On the other hand, repatriating jobs is highly inflationary, which will naturally push the US$ higher.
It is clearly not the case here and as long as the trend is down, we will respect it.
Even the Euro and the Yen bounced back up,
with gold following the move. These moves are "unnatural," but what can I say? There is no way to fade them unless their respective Effective Volume patterns point to a possible trend change, which is not the case for now.
The 20Y Treasuries are still in a bouncing pattern.
The 10Y US$/Yen rate differentials are slightly down, which in itself is equities bearish.
This is not what equities are telling us, with the Cumulative Ticks pushing higher and indicating that the S&P500 could easily bounce from support.
XME and GDX look relatively weak here, probably indicating the miners might not follow the equities upside story. (Are XME and GDX pointing to a stronger US$?)
Finally, on the energy front, XOM published a small beat on earnings overnight. This should support XLE, which is displaying a positive divergence to price.
Conclusions:
AAPL's beat will help the markets today.
XLE could offer an interesting long trade opportunity.