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Rising Yields Vs. Risk Taking

S&P 500 went through a similar daily pattern as on Monday – the weak tech, XLF and XLV telltlae signs didn‘t lie – this and gold with oil clues talked amply in yesterday‘s video. The slowly cracking tech breadth underscores the battle of narratives, the focus – soft landing vs. return of inflation forcing the Fed to raise again – as much with yesterday‘s manufacturing PMIs as with today‘s non-farm payrolls employment change.

With or without Fitch downgrade, it‘s yields on the long end that carry greatest significance. The long, AI-driven resilience in tech is getting duly challenged (hello Top 7 stocks, look at similarly precarious SMH chart too), and financials with healthcare not kicking in much yesterday, just highlights the consolidation below 4,625 resistance for the time being. Nasdaq surpassing 15,400 isn‘t coming soon, and DAX diving sharper than US indices underscores momentary caution as well.

Meanwhile, oil price upswing and still resilient job market consequences are paving the way for return of inflation – whether it‘s data for Jul already, or only Aug / Sep (I favor the latter two) – bonds aren‘t waiting, and are in my view reflecting inflation expectations rather than the still holding soft landing narrative.

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Let‘s move right into the charts (all courtesy of www.stockcharts.com) – today‘s full scale article contains 4 of them.

S&P 500 and Nasdaq Outlook

S&P 500 and Nasdaq

4,592 held as support yesterday, but won‘t be reconquered today – this Fitch gap would take a bit longer to convincingly close. For now, I don‘t see enough tech stabilization as in or as sustainable. Perfectly aligns with the weeks ago talked vision of greater trading range over the nearest month, which would be great for picking up the finest sectors (XLI, XLE, XLB, some XLV and XLF as talked in Sunday‘s analysis), beaten by souring tech sentiment.

S&P 500 and Nasdaq breadth

Market breadth is weakening, and it‘s not a matter of tech only – rising yields will still bite as stock market correction continues.

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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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