The bulls have regained some fight here and the US500 has held the 200-day MA and worked the upside, although Friday’s high has contained the rally. A break of 4539 (Friday’s cash session high) therefore could be a powerful force – interestingly, the level of amazement that the market is actually going up in the face of rising bond yields is certainly elevated, but up it goes and it’s hard to bet against the market until the 200-day MA gives way and the VIX pushes above 25% - a view our clients largely share with 60% of open position in the US500 held long and 65% held long in NAS100.
I guess there may be a view that we’re at near-term peak bond yields and with the US 10-year eyeing 2% perhaps the equity market feels we’ve priced in a lot. We’ll need some new news to push us through the 2% threshold. A big ‘perhaps’, as frankly we don’t know and it’s all flow – we just react to price and then try and put a reason on it afterwards.
Gold looks interesting and while we can look at the ATR or realised/implied volatility and see a grind higher/lower in price as the base case, there are some big levels in our sights that need to be on the radar – I focus on these, with some key charts that offer insight, in the ‘Good as Gold’ weekly video.
Again, we look ahead to US CPI (Thursday 00:30 AEDT) – with this in mind, it feels like we’ll see a quiet session ahead across asset class, with some modest tweaks to portfolio exposure – but few will want to add additional risk into the market with such a volatility event in our sights. Obviously, I could be wrong, but it feels like fixed income (bond) traders will be especially cautious and this could limit moves in FX and Gold – tech may do what tech wants to do. Still, this is the event to ponder and devise your own playbook.