SPX top, Treasuries and Dollar Rally subdue GOLD

SPX Topping; a new lower high

This week has been less exciting for equities as the major indices have failed to rally above last Fridays highs.

spx short time 2

As we look at the S&P 500 its easy to see that overhead resistance is becoming a large contributor to the days price action. Lets remember that in high Volatility environments like this price action is anything but easy to predict.

spx short time

Previously I had thought 2600 would mark the major resistance for SPX but after a couple days of testing we saw SPX break to new lower highs. I’m leaning short as I believe the bull market has indeed ended and the valuations have some more correcting to go.

Starting to put out a short line around this level and will add as price action confirms the trend reversal.

 

Treasuries and Dollar Catch a Bid:

I have long been thinking that to understand what Equities are going to do we need to carefully watch the Treasury market. Typically we have seen Equities/Risk Assets trade inversely to Treasuries, intuitively explained as investors risk appetite ebbs and flows.

Treasuries catch bid.PNG

When Treasuries start to rally and Yields fall look to equities for blood. Right now its starting to look like Yields may once again trend lower as investors shift out of risky assets. I’m watching to see if the 10Y yield will test 2.5% level in the next couple weeks.

Just when you think that maybe the Dollar is losing steam it bounces off $95 support and reaffirms a sideways trend.

dxy run

While I am looking to see a clear sign of a dollar trend reversal I don’t think its happening anytime soon. Possibly participants pricing in an easy Powell, but forgetting the bull dollar effect of QT balance sheet roll-off’s?

Gold has taken a hit in recent days but seems to be holding strength throughout the dollar run. A break below $1275 could be the signal for gold to retest say $1200.

Gold hurt.PNG

I’m bullish Gold in the long term but in the face of dollar strength (of even sideways) its unlikely to see those moves anytime soon. Although Gold has been strong in the face of relative dollar strength… maybe the correlation is breaking down a little?

Cheers

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