Key Tactical Takeaways:
> Following 5 straight days of struggling to close above its lower sloping short-term stop at 28.7, the VIX is now using this as support this morning.
> After all key risk proxies failed to reverse their bearish short-term trends earlier this week, the September correction has resumed. Key risk vehicles like SPY & HYG now eye 100% measured moves to ... & ..., respectively.
> As the dollar nears the start of its post-bottom target zone at DXY ..., GLD is nearing the start of its measured target zone at ..... We anticipate increased two-way flows near these levels.
> Energy is becoming grossly oversold near the end of what looks to be a mature wave structure.
Some Quick Thoughts:
If anyone has ever woken up from a horrible night's sleep then proceeded to start a drip coffee maker without placing the actual coffee pot into position, please let me know I'm not alone. Despite this disastrous start to my day, as a technician I couldn't be more excited about the fact that there is finally some good price action taking shape across in the intermarket landscape. This daily report is all about concise delivery of information, so we think the Top ETFs pages (10 - 11) do a sufficient job of summarizing the hey tactical developments that have surfaced over the past 24 - 48 hours.
For today, we'd like to focus on a few key items. First and foremost, from both a seasonal and historic perspective, this September downturn makes sense. Not only is mid-Sep to mid-Oct a very weak period for equities, the S&P's drawdown since the 08/18/20 all-time high close following a correction of >20% is very much in line with the turbulence that often occurs in the first several weeks following such an important breakout. While there is still measured potential to between ... & ... for the S&P 500, we are encouraged to see both cyclicals and technology showing some the best relative performance (i.e., not falling as much as the benchmark) of all 11 S&P sectors in recent days.
Next, to the dollar and precious metals. DXY is about to enter the measured target zone (... - ...) associated with the tactical bottoming effort. As GLD enters its target zone (... - ...), there may be a tactical shift setting up. If the start of these zones fail to generate countertrend reversals that can surpass short-term trend stops at DXY ... and GLD ..., however, the threat of extending to the outer reaches of the above-mentioned target zones will prevail. Lastly, we should touch on rates. Needless to say, the Fed has destroyed the price action in what has been this technician's bread-and-butter market for much of his career. That said, it is quite interesting to see that longer-dated interest rates have not been the beneficiary of risk-off flows during the recent equity carnage. We're watching ... on the 10-Yr yield very closely, as a close above this level could spark the next round of duration shedding from FI portfolios.
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