If I am going to write like me as opposed to writing like a market analyst I am going to write that the recent bump in inflation signals and hence, yields, has been a flat out pain in the ass. For the first time since probably around spring of 2016 – when I had to start bear calling the precious metals in the face of pervasive cheerleading and still rising prices – I actually have feelings of hatred for the market.
Ah but Gary, that is emotion! Yes ma’am, it is. But this recent reversal of the macro (bump in inflation signaling), interim though I still feel it is, has put a spanner in the works of the Q4-Q1 rally theme. Especially since we are on watch for its end (Q1 ends in a little over a month, after all and sentiment became over-bullish to a ‘show stopper’ degree).
Preamble aside, Tech leadership was one of the components of a projected interim Goldilocks phase, which may or may not have expired in the face of this inflationary whipsaw. Let’s check up on it.
First, here is nominal NQ having dropped to test very important visual support, which coincides with the daily SMA 200 and has the SMA 50 rising toward it. The 11900 area should limit the downside to keep the rally potential intact. If it does, I have my list of Tech related items on watch including Semi Equipment (AMAT, LRCX, etc.), Cloud (DDOG, CRWD, etc.) and maybe even a big Tech name or two.
On the negative side, the major trend is and has been down by the SMA 200. That makes this drop to test that moving average all the more important. Bottom line on this is that I want to be and am prepared for either event, a hold or a failure. Frankly, I’d like a clear path forward and if that path is to increase shorting and manage the bear market, that would be more than fine by me.
Here is the NQ/ES ratio, which shows the big pop in Tech vs. the broad US market. Since Tech and the Goldilocks contingent have led out of Q4 into Q1 this little potential topping structure will be important to either confirm or deny. Right now, RSI and MACD, while 50+ and 0+ respectively, are postured for a continued pullback and drop back into the the bear market downtrend.
Just an FYI view into the US market, taking a break from precious metals obsession for a bit. :-)