The Trump-Musk Effect: A New Era of Political and Financial Influence

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Our View

I would have loved to be a fly on the wall when Trump pulled Elon Musk into the mix, or when Musk pulled Trump in. Two of the world’s largest dealmakers teaming up. We all knew that for Trump to win, he couldn’t rely solely on the Republicans after being outsmarted when he lost to Biden in 2020. Clearly, the Democrats understood social media better during that election. This time around, Trump—or his team—knew things had to change and in came X it worked like a charm.

The Republicans hammered away at Biden and when he stumbled during the debate, they and X attacked on all fronts. When they named Harris as Biden’s replacement, the social media wheels kicked in like never before. Musk and X pounded away on Harris and her imagination politics and the nearly 12 million people that crossed over the southern border nearly unimpeded. Among them were criminals, cartels, gangs… you name it. Reports suggest anywhere from 160,000 to 200,000 Chinese nationals also crossed, creating what many call the largest security risk in U.S. history.

Once Harris began campaigning, it was clear she was under qualified and the Republicans just let loose on her. It didn’t take long for them to start picking her apart and with Musk and X pounding away, the Democrats started moving away. No one wants to go down on a sinking ship. With Harris’s weaknesses on full display, the election became a foregone conclusion. The Democrats were out, even after spending over $1.5 billion in the final leg of the campaign.

Trump already knew AI was the hottest thing in the tech world. When he and Musk started collaborating on business ventures, it was clear Musk was already way ahead of the game. Early on, Musk moved $850 million into a crypto wallet and not long after Trump started talking about making the U.S. the crypto capital of the world. There was already chatter about SpaceX and the waste costs at NASA. Then came the launch of the $Trump and $Melania meme coins, which are purely speculative and don’t have much of a business purpose. They can’t be used in decentralized finance transactions and don’t act as stores of value. Between the two, the Trump pump is up to almost $10 billion.

There’s no doubt I wanted change, but it looks like one hand was washing the other. They say Trump is one of the world’s greatest dealmakers, and it certainly looks like there was some give-and-take going on during the election and there are some very high stakes at play. I figured when Trump and Musk got together there was going to be some financial shenanigans and I don’t think we have seen the end of this. In fact, this feels like just the beginning. Musk is a smart guy and we are only a few days into Trump taking office. In the eight years since Melania hit the stage, we have never seen her smile so much, there must be more to come.

Am I surprised by the rally? No! Everyone sold off for three weeks before the election, and now Trump is saying exactly what the public wants to hear. Plus, yields have been falling.

Our Lean: I think we’ve gone far enough for a pullback, but the markets still look like they want to move higher. The ES contract high is 6178.75.

MiM and Daily Recap

The ES gapped up on its Globex session open, quickly closed the gap, and printed what would be its low for the day at 6087. Overnight, the market showed a steady grind higher, reaching 6119.25 by 9:00 AM where some profit-taking brought it back to open the regular session at 6116.25. An early low of 6111.25 printed in the first few minutes of regular trading which proved to be our low of the regular session.

The ES moved strongly upward and printed 6128 at 10:38 AM which led to a pause and pullback to 6119.50 at 11:10 AM. From here, another strong wave of buying moved the market to new highs and it printed its high of the day at 6135.75 just an hour later. From this point, the buyers were a bit exhausted and the market moved sideways and slightly lower, printing 6126.75 at 1:26 PM.

A sharp 20-minute rally brought the ES back up to 6133.25, but this move quickly failed, pulling the market down to 6124.75 at 2:30 PM. Another rally back to 6133 by 3:00 PM set the ES up for more profit-taking as it moved lower heading into the 3:50 PM Market Imbalance Meter (MIM). At the release, the ES traded at 6125, with imbalances showing 2.18 million to sell, pushing the market down to 6119.50. The imbalances then flipped at the 3:55 PM update, showing 860 million to buy, and we had a quick snap back up to 6126. This faded into the cash close of 6120.50, and a slightly lower post-market low of 6115 before the exchange closing print returned to 6120.25, up 28.50 points (+0.46%) for the session. The NQ exchange closing price was 21,985, up 212.50 points (+0.97%).

In the end, the markets were up again. In terms of the ES’s overall tone, it’s hard to sell off when tech is so firm. Volume was light, with the ES trading only 1.15 million contracts, while the NQ traded 487,000 contracts.

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Dan @ GTC Traders

Energy, Commodity Prices and the CPI Question

In recent weeks, we’ve seen the Energy Complex push to higher prices. Crude Oil is climbing steadily, natural gas has started catching a bid, and the broader energy complex seems firmly in rally mode. Naturally, Commodity Indices as a whole have also moved higher.

As we wrote last week and in other articles here at the Opening Print, we have been critical of the moves of the Federal Reserve for some months; and warned that the higher inflation prints that we are already seeing is a direct result of those missteps.

However those comments have dealt directly with missteps in Monetary Policy on the part of the Fed.

Now, we have climbing Energy and Commodity prices. Energy and Commodity prices are also a key driver of inflation, directly through gasoline, heating, and electricity costs, and indirectly by influencing the cost of production, transportation, and distribution. A sustained rise in energy prices often leads to higher headline CPI prints. Historically, when energy prices have risen sharply, CPI has followed with a lag.

Basis Hedging Unknowns

Producers, manufacturers, and large-scale energy consumers don’t just take energy prices at face value. Many hedge their energy costs months in advance to smooth out the volatility of oil and gas markets. These hedges—whether through futures contracts, swaps, or other derivatives—can act as a buffer, delaying the transmission of higher energy prices to consumer goods.

The question we’re grappling with now is how much hedging has already taken place. Have manufacturers locked in favorable energy costs during the softer pricing environment we saw in Q4 of 2024? Or are they exposed to this latest surge?

We do not claim to be Energy experts. The Energy and Commodity Sector is deeply complex, and we fear we would appear foolish to pontificate on the topic without this disclaimer.

It Certainly Does Not Help

What we will state, though, is that given Commodity and Energy influence on CPI? Rising energy and commodity prices, combined with what we view as misguided Federal Reserve policies, do not bode well for future inflation prints. We are not yet at the point of a 1970s-style Geo-Political Oil crisis, but the combination of structural policy missteps and surging energy costs cannot help in the current environment. The pressures from both angles make inflationary risks even harder to contain.

What Now?

We’re not going to pretend we have all the answers. But as we approach the next few CPI releases, here’s what we’re watching:

At the end of the day, inflation is rarely a straightforward story. Energy prices are just one piece of the puzzle. Sticky inflation in services, wage growth, and global supply chain dynamics all play a role. But with energy prices rising and the question of hedging still unresolved, it’s a dynamic we’ll be watching closely.

Until next time, stay safe … and trade well.

Trading Room News:

Polaris Trading Group Summary: Wednesday, January 22, 2025

Morning Session Highlights:

The session began with a focus on the Daily Trade Strategy (DTS), which outlined key levels and targets for the day. PTGDavid shared an image of the initial setup, highlighting the sandbox range of 6110-6120 for the morning. The market showed early strength, with bullish momentum evident in the @CL and @ES markets.

Key Lessons and Guidance:

Afternoon Session Highlights:

The afternoon session saw a period of quiet consolidation, with the bulls holding onto their gains. PTGDavid anticipated some “back and fill” action between 6128-6135, which played out as expected.

Positive Trades and Takeaways:

Closing Notes:

Summary of Yesterday’s Session:

This session was a great example of how to navigate a trending market while maintaining discipline and managing risk effectively.

DTG Room Preview – Thursday, January 23, 2025

Market Overview:

Earnings Highlights:

Today’s Earnings & Economic Calendar:

Market Sentiment & Technicals:

Summary:
The market is buoyed by the AI infrastructure initiative, with tech giants like Nvidia and Microsoft leading gains. Earnings from Discover, JNJ, and PG exceeded expectations, while economic data and Trump’s speech at the WEF will be key focuses today. Technicals suggest the ES remains in an uptrend, but whale bias leans bearish, indicating potential volatility ahead.

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Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.

Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!