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Equity Bulls Cautiously In Control Ahead Of A Very Busy Day - Morning Market Squeeze

Key Tactical Takeaways:


> Although tech did lead utilities during Monday's equity market rally, the resulting rise in the ratio did little to counter the deterioration toward the risk aversion leadership this ratio has been showing of late (see page 9).


> In 7 of the past 13 sessions, the VIX has failed to close above its bearish short-term stop at 28.70, after intra-day movement above this key stop. The VIX, which sits right at this stop as of this writing, will get yet another chance today.


> Monday's backup in rates probably went too far, too fast for there to be meaningful follow-through in the next 1-2 days. Near-term, though, the 10-Yr yield has finally acquired the leverage needed to eventually work toward ...


Some Quick Thoughts:


One of the benefits of having your own newsletter is that you get to save a lot of money on therapy, as it allows you the freedom to vent about some of the things that drive you crazy in this increasingly bizarre world. Yesterday's note provided a platform on which we could express our disgust for the fact that the equity “market” has gotten to the point where it can only go up if there is yet another increase in this country's already worrisome debt load (i.e. new stimulus). Deep down inside, we all know that you can't mend the decay at the level of the real economy forever. Until that time comes when monetary weaponry runs out of bullets, however, we must play the price action that is being dealt. Right now that price action is suggesting that...


The heads of both the Federal Reserve and the European Central Bank are on tap for today. The ECB President warned earlier that while virus containment measures pose a clear risk to the recovery, her biggest fear is a sudden end to fiscal support. Fed Chair Jerome Powell is expected to reiterate that the bank has done as much as it can, and that...


While we’re on the subject of fiscal support, “markets” still hope that House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin can construct a deal for a new stimulus package during today’s scheduled negotiations. Despite President Trump recently calling for both parties to " get it done" on stimulus, it is unclear if ...


With another week of heavy bond supply, led by long Treasuries, already weighing on traders' psyche heading into this week, Monday's narrative of there being a greater likelihood of a relatively large stimulus effort in the event of a Biden victory helped force a long-awaited breakout in the 10-Yr yield. While Monday's backup in rates probably went too far, too fast for there to be meaningful follow-through in the next 1-2 days, the 10Yr yield has finally acquired the leverage needed to eventually work toward ...


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