NFTRH+; Pre-market

Observations in US pre-market

  • Yields are bumping up again, putting further strain on bonds as would-be indications of easing inflation fears. The 10yr note has taken out its December low and the 2yr note is testing its November low, which was the ultimate low on aggressive Fed hawking.
  • This supports the US dollar, which is still on the projected rally (target 106 and the 200 day average @ 106.45). This would keep pressure on global stock markets, especially EM and Asia, which have been biased anti-USD for quite some time now.
  • Yet Goldilocks is carrying the morning in US stocks as Tech (NQ) is leading broad (ES) as NQ so far holds the support noted in yesterday morning’s update. I covered my SPX short yesterday as it (and ES) touched the SMA 50, which could act as short-term support.
  • Recall previous market phases where a strong USD also saw relatively strong Tech and weaker cyclicals and inflation sensitive stuff.
  • Commodities are generally weak and that includes copper, which is consolidating its move up from the flag a couple days ago.
  • Of course precious metals are getting hit with the commodities (inflation) stick as well as gold and silver ease and inflation bugs get run. Recall that gold (current: 1832) has lower to go to even touch the first support zone (1800 to 1820), so it is technically normal right now. Silver did stab down to just above its daily SMA 200 but could have more short-term downside as well (current: 21.56) to the originally projected support of 20.50 to 21.

Bottom Line

Despite the signaling in bonds (yields rising), the machines seem to think that the current inflation burst and its rising yields component will double top and fade. That is one interpretation, at least. US is getting the old ‘strong dollar’ bid, at least in micro time. It has happened before in macro time as well (look no further than 2014 onward).

However, as a technician I see gold and silver doing what they were supposed to do when coldly planning the correction back in January. The macro could swing back in favor but the indicators (like bonds) may have to put a hard test of previous lows (highs in yields) and macro data may have to come through indicating a softening Fed again before they get a serious bid. Unfortunately, if they are not bid sooner gold stocks could break down from the “normal” correction parameters we had projected per a couple of updates yesterday.

As also noted yesterday, these crazy machine-driven markets could reverse it all in a blink of an eye. I cannot play swami and predict that. Right now, it’s tenuous on the short-term. I’ll plan to be nimble about all assumptions.

I am about this close to adding Tech and playing Goldilocks (again, with high cash percentage at this time and foreseeable into the near future). Sentiment is still an issue, even though dumb money continues to fade and smart money is eating itself some stock market.

That’s all for now. Enjoy.