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Consolidation in the markets

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June 1, 2025
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While there is still over a month to go before we reach the halfway mark, it has already been an eventful year for financial markets.

President Trump can take credit/blame for a significantly large proportion of this eventfulness.

He has been active on the international stage, having been directly involved in efforts to force a peace deal between Russia and Ukraine, as well as inserting his administration in the ongoing tragedy of the near-East. 

So far, so awful. His team is currently involved in negotiations with Tehran, and most of the world must hope for a better outcome here, and the quashing of Iran’s nuclear ambitions. Mr Trump has also been busy back home.

His tax bill squeaked through the House of Representatives.

The Senate is next, and many are hoping that it will pass, possibly giving the US economy a lift through a mixture of (diluted) tax and spending cuts, despite adding significantly to the national debt. 

Of course, it is President Trump’s tariffs on US imports which have been the market’s chief focus.

The uncertainty caused by tariffs, and the mercurial manner in which they are dished out, has induced terrible conniptions amongst investors.

The tariffs have given the US Federal Reserve the perfect excuse to hold off from further rate cuts (having sliced 100 basis points off the Fed Funds rate over the last four months of 2024) while providing cover for Moody’s to cut the US’s credit rating.

Moody’s has looked rather exposed ever since Fitch downgraded the US in August 2023, joining S&P who beat them both, and caused much more of a ruckus, when it cut the US back in 2011.

It looks as if several major markets are now at an inflexion point, consolidating after recent moves while offering few clues concerning where they may go next. US stock indices feel as if they want to keep the rally going.

But they have already come a long way off their April lows, following their immediate negative reaction to Trump’s initial tariff announcement on 2nd April. 

As the May month-end approaches, the US majors continue to look overbought, according to their respective daily MACDs.

That could mean that they sell off from here. But their MACDs could also correct through a protracted period of consolidation.

Gold was significantly overbought in mid-April when it hit an all-time high of $3,500.

Since then, the price has pulled back, and the daily MACD has dropped down to more neutral levels. Silver has been stuck in a relatively narrow $1.50 range since mid-April.

Support has held around $32 per ounce, while resistance has capped the upside at $33.50.

Silver’s daily MACD has tracked sideways, again around neutral levels. Gold has made a series of record highs after finally breaking conclusively above $2,000 in early 2024. 

Yet silver remains significantly short of its own all-time high around $50 from April 2011.

Both have the potential for big moves as we push into the summer and beyond. The only problem is working out in which direction.

Crude oil has been in a strong downward trend since it topped out in March 2022 in the aftermath of Russia’s invasion of Ukraine. It also appears to be trapped in a range with its own daily MACD back at neutral levels. Oil has consistently run into resistance on every rally attempt. But for how much longer? 

Hyman Minsky wrote that ‘stability breeds instability’. But sometimes markets need a catalyst to kickstart a big move.

It could be that the trigger is tariff-related. Or it could be one of Donald Rumsfeld’s ‘unknown unknowns’. Whatever it may be, don’t be surprised to see an uptick in volatility in the near-future.

(David Morrison is a Senior Market Analyst at Trade Nation. Views are his own.)

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