Key Tactical Takeaways:
> There are only two levels that matter this week: ... on the dollar index (DXY) and ... on the S&P 500 cash index (SPX). As long as these levels hold through this week's key events, risk markets will maintain their upward trajectory.
> Although this can change at any time, one of the most important observations to be made right now is that ... continue to show leadership vs. the benchmark, as ... grow deeper into the Lagging quadrant. Again, this could change on a dime, so we'll be watching closely for any risk-off changes.
> USO fell into a short-term downtrend for the 1st time since 12/21 on Friday. Against a stop of ..., risk now leans to more critical near-term support at ....
> If sellers are going to reassert themselves in LQD, the ... area is the area from where they must do it.
> Although the VIX continues to fail at formulating a sustained move higher, the concerning trend of higher lows since late November will be allowed to develop further as long as ... holds.
Some Quick Thoughts:
Given the epic levels of euphoria that preceded it, Friday's equity sell-off brought an extra level of anxiety. In the end, though, price is the ultimate arbiter, and while major indices did enter short-term downtrends on Friday, they held firmly above more critical near-term trend stops. With former Fed Chair Janet Yellen set to face the Senate Finance Committee for her confirmation hearing as Treasury Secretary today, perhaps the market's reluctance to sell-off further should come as no surprise. You see, bears have taken countless beatings trying to bet against historic levels of liquidity. So, with the former Fed Chair likely to talk of the need for even bigger support for record high equity indices, they were quick to take profits during Friday's weakness.
Although this week is vitally important to the near-term trajectory of stocks, it's even more important for the dollar. Again on Friday, CFTC CoT data showed that large speculators continue to hold historic short positions in US dollar index futures. Therefore, to us there are only two levels that matter this week: ... on the dollar index (DXY) and ... on the S&P 500 cash index (SPX). As long as these levels hold through this week's events, risk markets will maintain their upward trajectory. Should these levels fail, however, the most ... would likely follow.
This morning's S&P strength picks up on strong global equity action. Although this can quickly change given some of the overheated momentum/sentiment numbers, all the major indices we follow ....
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