Last week was a week of many developments in many "spheres" but the two-standout development s in terms of markets have to be Oil and Equities
For me , both of those scenarios are suggesting that concern is mounting about the Economic backdrop.
Yields did bounce off the good support levels but not to any degree that suggests they are "out of the woods" on the downside after pretty significant falls across the board since late April.
So let us look at what happened on Oil and the equity markets
WTI
The pattern over the last 15-16 months on WTI is looking increasingly like a triangle within which there is a potential head and shoulders. In recent weeks we tested the top of that triangle around $83.80-$84.50 but were unable to break through.
Last week we completed a bearish outside week off the top of the triangle which suggests renewed losses to the downside. We also closed below good horizontal support around $80.60.
All of this suggests that we could now be heading materially lower towards Head and shoulders/horizontal and triangle base support in the $72.04-$72.93 area.
If that holds then we are still in the same consolidation we have been in for nearly a year and a half...BUT...If that range gives way, it opens up the possibility of further losses to test HUUGGGEEE support at $63.64-$65.06
A break below there, IF seen, would be "game Over" for WTI and suggest that we could be set to revisit levels below $40 again
There is little chance we see a move of that magnitude unless we are seeing a material economic or risk deterioration or BOTH
Oil is essentially battling the Geopolitical supply dynamics (potentially positive) and the Economic demand dynamics (potentially negative) and it seems to me that the Economic side and generally weak Global (China, Japan, Europe) and US data is starting to move the needle here.
On Equities, concerns are clearly growing also
Last week the S&P 500 posted a bearish outside week at the trend highs. This after clear triple negative momentum divergence completing on the daily chart and with a dramatic shift lower on 17th July in line with last week's piece on 16th July titled "What is it about 17th July"
The last time the S&P posted a bearish outside week at the all-time high was the week ending 7 January 2022 as we started the freefall in regional bank stocks
That was followed by a pause the following week before the fall resumed in earnest.
Banks are not leading that charge this time as this move is being driven more by semiconductor and technology stocks but later in the week broadened across most sectors (With the notable exception of Utilities and banks which looked to embrace the lower yield moves)
I have been very focused on the similarities in the S&P move (and NASDAQ) and that seen into the July 2000 wobble. One backdrop that heavily influenced the strong 1999 performance was the sprectre of Y2k which quite honestly turned into a massive "nothing burger" bordering on a "scam"
So it is interesting (and ironic) that we had a "mini" Y2k moment last Friday with the broad-based technology failure.
We have good initial trend line support around 5,493 and then 5,446-5,447- horizontal support.
Below that latter level would open up for a test of the prior all-time high set in April at 5,265
The VIX also posted an aggressive bullish outside week as well as a double bottom suggesting higher levels
The minimum suggestion is for a move towards 18% and above there 21%.
IF the range from 21% to 24% was to give way that could open up for as high as 30% (last seen in March 2023)
The Bond market had already spoken in its yield and curve moves of recent weeks.
The Economy had already spoken in the weak data that has also been seen leading to a precipitous drop in the Citi ESI.
The final 2 warning signals (Equities and Oil) are now beginning to flash Red also. It is still early days but there are increasing signs that we may be at a pivotal turning point in the economy and in Financial Markets.