Yields Hold the Key

S&P 500 confirmed the conclusion from yesterday‘s article, and the US session brought the first opportunity for bottom formation. At the same time, the rallies are still being sold into statement, proved correct as well, and nowhere it‘s clearer than in GS inability to keep good gains on earnings beat, general XLF weakness (careful with financials, coming sessions would provide a better entry point than they‘re at now), and aftermarket optimism on semiconductors upgrade failing to hold.

S&P 500 breadth is narrowing, industrials and regional banks dizzying, with just real estate and semiconductors with select tech plays holding still well. Interest rates are biting, and have already made it to my first yields target, now facing a fresh test there, and USD is also almost at my 103.50 amid quite some mixed interpreted central bank talk – last week‘s odds of Jan rate cut were 4.7% and now that‘s 2.6% only (fine advanced litmus test of what to expect for Mar, where I look for 25bp only still) – that works much against smallcaps and most of non-tech.

This is how I summed up the situation before the close yesterday in our channel.

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What follows, is yesterday‘s example of higher volume, noticeable lower knot (wick) that buyers want to see forming on the 4 hour chart, the sooner the better.

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That‘s what we didn‘t see formed premarket, and here‘s my summary at the onset of European session.

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So, how close to rising yields and rising dollar rejection are we?

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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, featuring S&P 500, precious metals and oil.

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S&P 500 and Nasdaq Outlook

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Market breadth reveals the extent of damage inflicted yesterday, repairing which requires yields and dollar cooperation. I don‘t view though selling panic developing as anyhow imminent – UVXY with VIX retreated somewhat as well, and put to call ration spike hasn‘t been challenged yesterday either.

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