Key Tactical Takeaways:
> Despite recent equity softest, Treasuries remain under pressure. While near-term leverage for the 10-Yr yield has shifted toward ...%, short-term Treasury market conditions have stretched to where any accelerated equity weakness, should it materialize, would bring a corrective bid to Treasuries.
> Crude oil registered its highest close of the entire post-09/08 range on Tuesday, signaling confirmation of the bottoming formations we've been eyeing. The short-term will favor continued upside follow-through against $....
> After the VIX closed > the bearish short-term trailing stop at 27.8 on Monday, the far more critical near-term stop at ... is being tested this morning. A close > would introduce the usual pickup in pre-election volatility.
Some Quick Thoughts:
With the VIX primed and on the cusp of a break above the all-important near-term stop at 30.20, it is "do-or-die" time for the benchmark S&P 500. Although the S&P cash index did find support at our bullish NT Trailing Stop of ... on Monday, the benchmark has not exhibited the usual "get-up-and-go" that has become so common throughout its manipulated long-term uptrend. While intermarket cyclicality looks fantastic right now, with industrial metals, crude oil and rates all backing-and-filling to new cycle highs in recent days, there are always instances when cyclical correlations break down before returning to historic norms. In other words, a brief equity market shakeout against broader upside cyclical rotation would fit perfectly within the window of turbulence that typically opens in the weeks ahead of an election. In addition, such a development, should it occur, would ...
While recent Treasury weakness (higher rates) and strength in industrial metals and energy is probably a reaction to the next round of stimulus that will likely come, the equity market, where prices have already been so propped up in recent months, have to digest the fact that this stimulus probably isn't going to materialize anytime soon. With this in mind, we must reiterate that this is a market flush with novice investors who simply are not accustomed to adverse conditions. With the realization of no pre-election stimulus slowly sinking in, 5-day returns growing increasingly negative, and some the hottest names of 2020 (AAPL & TSLA just to name a couple) taking it on the chin in recent days, the market's hesitation as SPX sits on a technical ledge speaks volumes.
Bottom Line: Please don't shoot the messenger...this market simply looks ....
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