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Inflation Expectations Breaking Out - Weekend Macro Press

Key Tactical Takeaways:

> An abundance of evidence suggests EEM is vulnerable to mean reversion. If you seek confirmation a short-term trend reversal, wait for a close below ....


> Profit taking on USO longs is warranted near ...; however, the potential for an overshoot to 33.85 will remain high as long as a trailing stop at ... holds as closing support.


> Pending a close > ..., look for pullbacks to ... to initiate GLD longs.


> Extreme sentiment, tired momentum and extreme displacement make copper vulnerable to a

swift mean reversion retreat. Confirmation below JJC ... is advised before initiating puts, though.


Market Outlook:

Market-based inflation expectations broke to 1.5-year highs this past week. This is happening coincident with growing expectations for the $908bn bipartisan stimulus deal and growing expectations that the Fed will ease in some additional way at their next meeting, which is just two weeks away.


Considering that these two events are anticipated by the market, one can argue that the recent long-end sell-off will soon become priced to perfection regarding this narrative, and therefore may be nearing a countertrend pause in rates. Technically, when we look at the 30-Yr yield, the wave structure has matured to the point where...


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