My charts are down this morning so no "pretty pictures" just a few overnight thoughts.
Firstly...markets are broken. There is no World in which the equity and Bond market reactions yesterday to a 7k beat in one initial claims number makes sense.
All that shows you is that in the coming weeks we are likely to see increased volatility and outsized reactions to market news and data.
Notwithstanding that- it is what it is.
The 1990 analog for Japan is now a work in progress but the 2000 and 2007 analogs for the equity market and the bond market respectively are intact.
First the equity market.
Yesterday the S&P had one of its best up days since November 2022 and Es1 almost posted a bullish outside day. That was just missed but the open yesterday was below the open of the past 3 days and the close was above the close of the last 3 days....effectively a bullish engulfing day versus not just the prior day but the prior 3 days. The last time we got something like that was in February resulting in a move higher over the following 3 weeks.
In 2000 after the move lower that began on 17th July the Equity market turned in early August and actually rallied for the full month into 01 Sept before turning lower again.
So, what now? The bias is that we can continue higher from here on Es1 with first good resistance at 5,433-5,465. IF that gives way then an extension towards 5,600 is possible.
So, the bias here is further short-term strength before likely renewed losses.
What about Fixed income.
Fixed income and the US 2-year yield in particular continues to follow the path into and out of the Employment print on 03 August 2007. That includes the 3-4 day bounce in yields into 08-09 August before stabilising and moving lower again- which we have just seen.
The 4.12-4.13% strong resistance on the 2-year yield is intact and decent resistance around 4.03-4.05% on the US 10-year yield has also held so far (4.02% high so far) Much stronger resistance is higher at 4.14% to 4.17%
The US 2's 5's curve (Financial bible) has also been testing pivotal resistance at minus 19 to minus 21 bp's but continues to hold that range on a weekly close basis - so maybe a danger of some small bull flattening again near term
So, the bias for now is that this rise in yields may have already topped out
Elsewhere
Oil still looks "perky" near-term and with risk/ economic view stabilising for now Geopolitical concerns get more short-term weight and a move towards the $78.88-$79.19 "gap" on WTI looks likely.
Gold is also looking more "perky" but needs to break resistance at $2,432 and $2,478 to re-enter full bullish territory.
Bitcoin has a very impressive bullish weekly candle that could suggest all the way back towards $70k again.
FX
USDJPY is stabilising and at the margin looks like it could rally further. IF 147.90 goes it is even possible the bounce could extend as far as 151.90-95 again.
USDMXN has an inverted weekly hammer somewhat similar to that seen in April and June that could see it all the way back towards 18.15 again.
USDCNH has also stabilised having hit the 7.0875 target and could see as high as the low 7.20's again but if so that should likely be faded.
