This is the day I have been waiting for, for months. The day that set the path forward for markets and the Fed in 1990, 2000 and 2007. (Covered extensively in yesterday's piece and others in recent months. The Final Countdown https://shoe-fitz.rjobrien.com/the-final-countdown
Everything suggests we could see a "shocker" today, BUT I have seen too many things over the last 40-years not to recognise the randomness of any one day. However, the outcome is not linear. Even if we get solid prints today it does not change the backdrop we have being seeing develop over the course of this year. However, given how markets have moved it would clearly create a sharp pullback in a lot of moves.
On the contrary, a shocker would fully validate the big shift we have been seeing and set us clearly on the roadmap I enclosed in yesterday's piece.
In this note I will just try to cover the relevant levels that need to be watched on the day.
Fixed Income
US 2-year yield: Support levels on the downside are 3.65% (recent low) and then 3.55% (The march 2023 pivotal low) Below that latter levels opens up the likelihood of a move towards 3%. Topside levels are 3.93% and 4.12%.
US 10-year yield: Major support at 3.66-3.67% (recent low and 76.4% pullback of the May-October 2023 move higher. Below there, opens up for a move towards the major pivot at 3.25%. Topside levels are 3.76% and 3.93%
US 30-year yield: Major pivotal support comes in at 3.94% with a break opening up 3.82% and below there, 3.40-3.46%.
US 2's 5's curve: (My financial bible). Major pivotal resistance that has been continually tested over the last 18 months stands at minus 19 to minus 21. A weekly close above, if seen, opens up for a move initially towards minus 4 bp's (200-week MA) but eventually to +35 bp's +.
Equities
Es1 is in danger of posting another bearish outside week today on a close below 5,561.25. This would be the 2nd bearish outside week in 8 weeks - the last being at the all-time high in July. Such a close would suggest a move back to test the recent low at 5,120
Commodities
WTI continues to soften and has very good support at $67.70. A break below here opens up for losses towards $63.60-$64.80. A break below there (trapdoor), if seen, opens up the way for major further losses.
Gold has an outside chance of a bullish outside week on a close over $2,529
Natural Gas (Ng1)
is actually looking bid and a close above $2.30 (Double bottom and 55/200-day MA's) would suggest at least $2.75
FX
USDJPY has major support at 141.70-140.25 and a weekly close below, if seen, would suggest losses as far as 136.50-60.
GBPUSD is approaching the 76.4% pullback level at 1.3328 and a break above would suggest as high as 1.4250 over time.
USDCNH is key here. It is once again testing the major pivot at 7.0875. A weekly close below, if seen, would likely have broad based USD implications and suggest losses as far as 6.8350-6.8450.
