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10s Face Wall Ahead of NFP, Oil, S&P Steady After LA Lockdown - Morning Market Squeeze

Key Tactical Takeaways:

> As the S&P 500 faces a make or break technical set-up (see page 8), the potential for manipulation-related hope to cause stocks to bleed higher will exist against a stop of ...


> For our current oil long via USO, the news out of LA last night certainly raises demand concerns. Pending a close < ..., however, the recent pullback from the 11/25 high will be viewed as ...


> The 10-Yr yield faces a wall at ...% ahead of Friday's jobs report. If the NFP number is weaker than expected, there is scope for a knee-jerk drop to ...%. Conversely, a strong number could spark an initial spike to ...%.


> We protect some of our biggest winners (FDX, PD and ATLO) at yesterday's open, to clear the way for ... and ... that we'll be adding at today's open. As noted above, we're also ready to add GLD on any retest of the recent lows.


Some Quick Thoughts:

Several weeks ago we began warning of "the dark winter ahead," in anticipation of the renewed lockdowns that would come as a result of a parabolic rise in virus-related hospitalizations. Well, the numbers are getting downright scary and just last night the Mayor of Los Angeles ordered residents to stay home, warning that the city is approaching a "devastating tipping point" as the US and the state of California see unprecedented numbers of new cases, deaths and hospitalizations. As the market began telling us more recently, however, it is looking beyond this winter's coming ugliness.


Several days ago we also said, “things are so bad in the real economy that it’s good for stocks.” As lockdowns become more common, and damage to small businesses worsens, the dollar’s swoon is telling us that a new regime of massive monetary manipulation of risk assets is coming. Yes, even as the benchmark equity index sits at an ATH. You just can’t make this stuff up. :-(


Bullish sentiment, like momentum, can remain extended longer than contrarians anticipate. Therefore, the irresponsible risk taking of late can continue to the point where the potential for a bleed-up in the major indices should not be underestimated. We're advising students to maintain core long positions, but to cut the amount of correlated exposure by half. When it comes to the S&P 500, the trend will favor such a scenario against a trailing stop of ....


When it comes to gold, we mentioned earlier this week that we like the idea that gold is in the process of developing a tactical bottom, but that the lack of hedger conviction recently suggests that bottoming will be more of a process than a V. Now that GLD has negated our system's bearish trigger, we can be buyers on any retracement of this week's rally. For our current oil long via USO, the news out of LA last night certainly raises demand concerns. Pending a close below ..., however, the recent pullback from the 11/25 high will be viewed as a healthy "flag" correction.


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