Bears in Command
S&P 500 had arguably made a local top – formed a black body candle with sizable lower knot, which I‘m looking to get follow through selling today, and on tomorrow‘s set of (likely disappointing) economic data:
(…) Thursday‘s Philly Fed data is likely to surprise on the downside, housing would continue to cool, and unemployment claims to rise – these are all leading or coincident indicators while CPI is a lagging one. Hard to derive any other conclusion that the Fed would overdo it on tightening (by looking into this rear view mirror, in the steepest pace of monetary policy change since the mid 1990s). Even if they were to pause now, the effects of tightening already in would take 12 months at least to manifest in full. Hard landing is virtually baked in the cake as the Fed is less sensitive to asset price gyrations than it was in Dec 2018.
This is why I can‘t be bullish at this stage, not when I see bonds pressuring the Fed to do more, when bonds are still disregarding the weakening real economy – Thursday‘s data would be the revealing catalyst of how far this relief rally off the CPI Thursday got ahead of itself.
And Treasuries show no sign of calming down – the parabolic move in yields doesn‘t look to be over, the 10-y yield is already 4.10% premarket, and that means significant risk-off headwinds today. My key 3,735 level had been decisively broken, and the bears are in the driver‘s seat. Certainly, the NXLF earnings jubilation being sold hard and fast on second thoughts concerning revenue and guidance, is a welcome sight confronting the barrage of fresh uberbullish calls from elsewhere meeting reality.
So, the S&P 500 relief rally is duly reversing, and it wasn‘t a move to get excited about – my key 3,795-3,810 zone didn‘t come into jeopardy. On the flip side, real assets are suffering as it‘s all again about yields and the dollar. Much is happening beneath the surface – the Fed swap lines providing other central banks with USD liquidity, is seeing quite some interest on a weekly basis, and I‘m not talking Switzerland and Credit Suisse only here as UK shouldn‘t be forgotten.
Crude oil is better placed than gold so far, where nominal and real rates are biting (it‘s the same what‘s powering banking), but I still stand by the call of silver squeeze approaching, just give it 3-4 miliion oz max more to be removed, and the tide is to turn.
For now, the universal rise in yields (both long and short end) is taking its toll as the Fed isn‘t blinking. Told you it wouldn‘t – not this fast.
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All essays, research and information represent analyses and opinions of Monica Kingsley that are based on available and latest data. Despite careful research and best efforts, it may prove wrong and be subject to change with or without notice. Monica Kingsley does not guarantee the accuracy or thoroughness of the data or information reported. Her content serves educational purposes and should not be relied upon as advice or construed as providing recommendations of any kind. Futures, stocks and options are financial instruments not suitable for every investor. Please be advised that you invest at your own risk. Monica Kingsley is not a Registered Securities Advisor. By reading her writings, you agree that she will not be held responsible or liable for any decisions you make. Investing, trading and speculating in financial markets may involve high risk of loss. Monica Kingsley may have a short or long position in any securities, including those mentioned in her writings, and may make additional purchases and/or sales of those securities without notice.
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