Bond Bulls Need to Defend Here!
Monday:
Greetings! Hope you had a great week last week. Thanks again Archna, Mikey and Rithika for keeping the live trading room going while I was away! Coming in with fresh eyes, I can see we tagged perfectly the SPX 4444 and overshot my QQQ 368.83 daily gap fill price target. The yen, yuan and rupee are back at Oct 2022 levels with the USDINR looking like a big move is coming for higher. My growth-to-value rotation call wherein mega cap tech would soften pulling down indices has been in play while I was away with NDX losing 2.5% to DIA .15%. It does not look done except for an intraday bounce in NYFANG, XLK + SMH. LOTS of bounces off their 55D as discussed live: like NVDA chase into 431.69 which I thought would take 2 days!
META, TSLA, AMZN and GOOGL are still the strongest FANG stocks.
XLK short from 177.30 into 168 but that is daily support until it isn't. Getting/staying > 172.50 is bullish; below is bearish on wkly close which can foretell a nice continuation trend reversal.
SMH has been in distribution (read profit taking) in August, so despite some strong intraday bounces today, the 2 wk sell-off has helped trigger the rejection of my SMH:SPX chart on the monthly.
NYSE net selling started Aug 1st with breadth starting to peter out last week, but really weaken just today. VIX is poised for pullback to 14.30 daily gap fill - likely by Wed VIX expiry - before digesting and moving higher into end of Aug and September.
Economic data this week is light with FOMC minutes due Wed 2PM and jobless claims Thursday morning.
I continue to expect a choppy month and growing potential for SPX 4000 by end of September. SPX daily gap fill to the upside of 4567.53 which will be PT if SVXY can get/stay above daily gap fill of 87.15.
Bond bulls need to defend here as the 10Y looks very poised to move higher in time above 4.3% en route to 4.7.
USD is bid but not spiking. Still under 103.50 DXY.
Gold, silver, miners still a swing short into wkly gap fills. It's just taking a long time...
Oil is on day 7 of holding onto $83 crude. ULSD futures made it all the way back up to 3.20 resistance from the July breakout at 2.60. CRAK also made it to the wkly trendline.
All three I expect to soften here. I will check my intermarket analysis from my week away and all my alerts plus open swing/trends. I can see LLY #trend and GRPN #swing did extremely well post earnings
Tuesday:
My Intermarket analysis to show the market rolled over and hadn't stopped going down (read: is not buy the dip but sell the rip)
Wednesday:
Most boring morning action in a while! I trusted no intraday spike higher. They are on extremely lackluster volume and options market is asleep!
Recently added #Trend play TJX did great with earnings. But nothing else really delights.
Markets seem 'steady' but in reality the breadth under the surface is clearly in distribution: (read: selling) and net volume also shows yday a big net selling day with the 10W coming into view for potential mini bounce then potential larger trounce end of Aug. VIX expiry is done and monthly Aug OpEx Friday clears a lot off the board, but in order for my SPX 4000 IF-THEN call to play out, SPX needs to close below 4427 on wkly, then 4302 tag/bounce needs to break for retest of 4218 before 4062. All needs time and a trigger.
Higher 10Y - my rising DXY/ZB1 ratio chart confirming. Higher VIX - my stock/bond ration chart confirming.
Higher USDJPY > 145.90 + USDCNH > 7.3 - supporting higher US yields will be confirming.
Lower SVXY - below 82.33 pm wkly will be confirming.
Lower T2123 + T2104 - breaking/staying below 10W for trend reversals on wkly will be confirming.
Today we have FOMC minutes released at 2PM and Jobless Claims Thursday premarket. But otherwise market seems to drift lower into NVDA earnings Aug 23rd - same day...
The United Auto Workers said it will hold strike authorization votes next week to determine whether the group’s 150,000 workers are ready to walk off the job when their contract expires Sept. 14.
Macro headwind of size: waning liquidity. Generally, liquidity is now under pressure due to both stealth QT AND falling values of collateral - which private sector and shadow/banking relies on heavily to fund assets. Higher yields = collateral is worth less = less liquidity. At the same time, China & Japan selling USTs removes liquidity (akin to QT) as real yields rise (highest since 2008/Lehman). So my warning August 1st: Market is Priced to Perfection turned Time to Protect and now: Bond Bulls Need to Defend Here.
Looking Back:
My Bloomberg and SpotGamma interviews were well-timed warnings!
Looking forward:
Craig and I had our well-timed bi-weekly Macro EDGE Webinar today - which will be posted tomorrow. It's long one but really really worth digging into how everything changed August 1st! It's an important review and look forward to better understand the big moves that are happening because of Treasury bond issuance, China devaluation risks and Bank of Japan's carry trade unwind - and their impact on US yields. We also discuss my most pressing intermarket charts from Growth-to-Value for 2nd half and the higher jobless claims that are starting to percolate higher which will pull forward recession risk. Yes, we also cover the dangers of the leveraged volatility-selling regime becoming unhinged.
Risks are rising. As I wrote to clients this morning as a reminder -
So my warning August 1st: Market is Priced to Perfection turned Time to Protect and now: Bond Bulls Need to Defend Here!
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