Mideast Market Impact

S&P 500 sharply reversed the non-farm payrolls decline, and rallied off oversold readings, and the same can be said about junk corporate bonds, smallcaps and other intermarket risk metrics. After the bear squeeze ran its course, Middle East came into spotlight, and the following 4-part series shows the immediate and longer term consequences for markets. The premarket calls still hold.

More analytical coverage comes within the regular chart section – and as promised, I‘m opening a small sample from, a little preview of, the new sectoral and individual stocks upgrade to the daily Trading Signals and Intraday Signals publications – welcoming feedback so as to serve you best!

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Let‘s move right into the charts (all courtesy of www.stockcharts.com) – today‘s full scale article contains 5 of them.

Sectors and Stocks

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Weekly tech chart shows that this „safe haven“ is unbroken, and that the Magnificent 7 have kicked in as much as semiconductors, and this correction is tentatively over – and Middle East won‘t change that in my view.

Yields though are to be watched for resuming their upswing – 10y hasn‘t topped, and is marching well above 5%. While the war tensions last, Treasuries have ideal opportunity to gain in value, and that would support tech, Big Tech (differences inside exist, but now I‘m talking the sectoral direction that‘s supported by semis not lagging behind). Yes, it‘s an amazing show of relative strength in NVDA and AMD – a harbinger of accumulation to rule in the weeks ahead, especially if inflation doesn‘t misbehave in more sticky ways, and Nov rate hike gets pushed to Dec only.

Real economy isn‘t yet rolling over, and sufficient residual faith in disinflation exists to underpin NDX in its decline, and the Sep bottom bullish divergence vs. ES tips the odds of appreciation to go on for a good couple of weeks (roughly till Nov FOMC gets into focus).

This was a sample of a single sectoral analysis that I tie to the current business / credit / both cycle(s). Next comes a sample individual stock analysis. Whether sectoral or individual stock review, these will form a regular part of the daily ES-SPX-NDX analyses, and won‘t be delivered only once a week, but more often.

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Communications are in a weaker relative position than tech, and NFLX is a good example thereof. See how poorly it did on Friday‘s squeeze. The volume differential is quite dismal. While the $370 bottom is obviously in, and unlikely to be broken on a closing basis this week, the path to $400 - $410 would be thorny – I see the stock as mostly sideways and consolidation over the nearest 1-2 weeks. If tech catches solid bid, NFLX is sure to partially benefit, but that bid depends upon yields and dollar direction – I am cautiously optimistic, and favor meager NFLX gains over the nearest weeks.

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