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Rates To Bleed Even Higher, $ To Weigh On Stocks - Morning Market Squeeze

Key Tactical Takeaways:

> The US$ ... for the first time since late October on Monday. The buck's improved rate of change of late has already had a negative influence on metals and, if history repeats, should weigh on equities, at least for the near-term.

> Weakness in EEM on Monday is a reflection of recent ... strength. As a result of EEM closing < ...


> HYG is now ST .... It will become vulnerable to a ... targeting ..only if there is a close < ....

> Long-end Treasuries are in the midst of a CTA liquidation/accumulation cycle. The 10-Y yield can continue to bleed higher against a trailing stop of ...%.


> We're locking in nice gains in USO, IPI and WMG on the trade ideas sheet at today's open. We're going long ... at the open and would be a buyer of ... in the event of a pullback to the 24.30 area.

Some Quick Thoughts:

If we define a financial instrument as being "overbought" when its relative strength index (RSI) momentum indicator touches 70, then the S&P 500 cash index satisfied that classification for the 1st time since early September on Friday. What many traders fail to recognize is that simply being overbought is not a signal to sell. In bull markets, conditions can actually remain extended for prolonged periods. That doesn't mean, however, that tactical risk reduction should not be implemented during such periods, especially when there are little cracks that appear to be forming across the intermarket landscape.


Other than the fact that bad news has tended to be good news for risk assets in this new world we live in, seemingly meaningful news events haven’t moved the S&P of late. Therefore, we won't spend any time discussing the new 2021 narratives that financial media outlets are trying to sell you. As we've been discussing since late last week, what we are paying attention to is the dollar. For the first time since late October, the US$ has now ..., opening the door for, at a minimum, a multi-week period of ...


On its own, for us to suggest that the $ has probably reached a point where it's probably done making l... may not seem that important. However, the $ is one of the few assets where just an adjustment in its rate of change (ROC) can have a great influence over the intermarket landscape. Gold's post-11/30/21 rebound has already been knocked back to earth because of this adjustment, and just in the past few months similar $ ROC adjustments have fostered equity market digestion in mid-Sep & Oct. When we couple this with the fact that HYG ... on Monday, some de-risking is recommended. Therefore, we're locking in nice gains in USO, IPI and WMG on the trade ideas sheet at today's open.


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