Growth's On The Ropes - Morning Market Squeeze

Key Tactical Takeaways:

> The dollar's improved rate of change, seasonals, extended bullish sentiment, extreme gamma, and the distraction from the next round of stimulus being caused by the new impeachment push are weighing on equities, leaving the S&P focused on first support at ...

> Growth is about to face a critical test vs. value, as the ratio now rests at multi-week support. Given the weakness in ...

> Pending a close > ..., GLD stays vulnerable to ...

> Long-end Treasuries are in the midst of a CTA liquidation/accumulation cycle. Although the 10-Yr auction attracted strong demand on Tuesday, the 10-Y yield can continue to ....

> For a tactical, near-term trade, Tuesday's US$ decline gives us the opportunity to get long UUP. We'll do that at today's open. We'd love to short ..., however, earnings are too close by, which goes against our rules of entry.

Some Quick Thoughts:

Recently we argued that market participants are looking beyond Trump and trying to focus on the implications that upcoming policy changes will have on asset prices. While we still believe this to be true, we don't mean to trivialize the fact that this new impeachment circus is taking Washington's focus off of the next refill of the punchbowl (i.e., new stimulus). So far, though, the benchmark equity index appears to be taking this in stride, as yesterday's intra-day pullback bounced right off our ST Noise Buffer at SPX .... Futures are weak this morning, though, so pay attention for a sustained intra-day breach of this level, which would set the stage for a critical test of the ... to ... area.

Without spending another day talking about all of the structural, seasonal, currency and sentiment extremes weighing on equities right now, we should highlight the fact that widely followed ...stocks look very vulnerable here. If earnings weren't so close (next Tuesday), we would jump at the chance to short... today. While there is certainly room to profit ahead of that event, it's not a big enough window for our preferred risk 1 to make 2-3 setup. Conversely, it should be noted that while ... is technically extended, some of its largest constituents are currently staging parabolic rallies, which MAY promote blow-off conditions in this ... ETF. As the battle between growth and value plays on, value appears to be gaining steam of late, and the all-important ratio is now testing major support that, if broken, would produce yet another head of steam for value (see page 9).

The climb in long-end rates slowed on Tuesday, with bond investors showing their demand for Tuesday's 10-Yr auction. While this bodes well for today's 30-Yr auction, a failure by the market to drive the 10-Yr yield to a close < ...% will leave the door open for rates to bleed higher sans any correction.

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