The resolution of the debt-ceiling standoff!? | 26 May 2023

#SP500:

The hedge fund holdings were concentrated in the technology, health care, and consumer discretionary sectors. Despite all of the negative sentiment, hedge fund managers appeared to be more offensive. Fund managers added to technology, communications, consumer discretionary, industrials, and materials. To help fund the increases in the aforementioned cyclical sectors, hedge funds decreased allocations to more defensive sectors, shown below. Fund managers also reduced sector positioning in financials and energy, although energy has been more defensive than offensive over the last year. Given the continued technical progress for the broader market and the potential end to the Fed’s rate hiking cycle, a change in sentiment may be on the horizon, while pressure to cover historically high short positions builds. What does this mean for the SP500? It could be a relatively quick trip toward the August highs near 4,324.

Trading recommendation: buy 4166 and take profit 4250.

XAUUSD:

The amount of money that the US government has on hand to pay its bills plummeted by $53 billion, increasing the chances that the government will run out of cash by early June if the debt limit isn’t raised or suspended by then. The change in the cash balance was the biggest one-day drop since March 1 and pushes the Treasury’s coffers to a level last seen on April 12, before tax payments briefly replenished it. The expectation was that if revenues were big enough to get the Treasury through an anticipated influx of tax money on June 15 — when some payers have installments due — then it’s also likely to bridge the gap to the next available extraordinary measures on June 30 and stave off default until for at least several more weeks. This is a positive signal for precious metals.

Trading recommendation: buy 1950 and take profit 2012.

#WTI:

Oil prices fell, as investors worried that U.S. politicians will fail to agree on a new debt ceiling and trigger a default that would hurt the economy and reduce fuel demand. White House and Republican congressional negotiators on raising the federal $31.4 trillion debt ceiling were quiet. A second meeting broke up late with no progress cited by either side and with negotiators saying they were not sure when fresh meetings would take place. Oil market were also spooked by Federal Reserve Chair Jerome Powell's comments that inflation was "far above" the Fed's objective, adding no decisions had been made yet on the next interest rate action.

Trading recommendation: range 69.00 - 72.50.