Key Tactical Takeaways:
> USO has established a very tight and important range between ... and .... A close > the latter offers a test of the recent highs, while a close < the former marks the start of a larger correction.
> Recent ranges at the long-end of the Treasury curve appear to be resolving in the direction of the prevailing trend. As a result, the benchmark 10-Yr yield now eyes a test of the psychologically significant 1.0% level against a stop of ...%.
> As a result of the push higher in rates, XLF now eyes ... against a stop of ....
> The 5-Y, 5-Y Forward Inflation Rate touched levels not seen since Jul '19 on Wednesday, offering the possibility that the wave structure is entering an extension phase. 2-3 more days are needed to confirm this, against a stop of ...%.
> The recent rebound back in favor of growth leadership vs. value, which is still countertrend in nature, took a breather on Wednesday. At this time, there's nothing to suggest that this rebound in leadership can't extend a bit further.
Some Quick Thoughts:
With so many facing financial hardship this holiday season, a discussion about the favorable seasonals of the next seven trading sessions - also known as the "Santa Claus" rally - is not one that should be taken lightly. So far, December seasonals have not repeated the average squiggles of the past, however, they have rhymed. As long as this continues, seasonality suggests that the S&P 500 should remain buoyant, toward our next Tactical Liquidity Zone of ... to ..., against a stop of ... into the first few days of the New Year. We've provided the performance and distribution figures for this cycle on the Events-Driven Stats page (page 8).
Although the breakout in smallcaps is one of the reasons we're maneuvering to develop a value-added trade ideas/management product for January release, we'd be remiss not to highlight the grossly extended conditions in IWM at this time. Sure, there's room for short-term follow-through gains. However, this is not the area where new long-term money should be put to work.
That's it for today, folks. We'd like to wish you all a very happy and safe Christmas. For those of you who do not celebrate Christmas, enjoy this time off with your family.
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