Dead Cat Bounce? Bears Aren‘t Taking Prisoners Now

Right from the open, stocks have been losing altitude yesterday, and value couldn‘t indeed overpower the tech slide. Long-dated Treasuries had a climactic day of incomplete reversal on outrageous volume. Regardless of the evidence of asset price inflation, there is almost universal short-term vulnerability, and yesterday‘s broad based selling spanning precious metals and commodities, confirms that. The dollar has been missing from the party though, only having reversed prior losses to close little changed on the day.

Are we seeing a trend change, or a time-limited yet powerful push lower? That depends upon the asset – in stocks, I look for the tech big names and healthcare to do worse than value (the VTV:QQQ ratio jumped up greatly through the week, portending the tech issues). Both silver and gold would be under pressure, and I look for the white metal to be mostly doing better overall. Oil and copper would take a breather while remaining in bull markets.

That roughly matches my very short-term idea for where the markets would trade, echoing the expressed, tweeted need to watch oil and copper turn the corner still yesterday (copper didn‘t, not confirming any intraday turnaround notions as valid) – the below being written 7hrs before the U.S. open:

(…) As yesterday’s session moved to a close, the dollar erased opening losses, and went neutral. TLT’s massive volume shows that yields are likely to stabilize here for now, and even decline a bit – HYG absolutely didn’t convince me. The oil-copper tandem didn’t kick in yesterday. Right now, we’re in a weak constellation with both silver, oil, and stocks down. Copper’s modest uptick doesn’t cut it. So, the outlook for the European session on Fri is more bearish than bullish for stocks really, and gold rather sideways in the coming hours.

Would we get a bounce during the U.S. session? It‘s possible to the point of likely. The damage done yesterday though looks to have more than a few brief sessions to run to repair. If you were to be hiding in the not too greatly performing S&P 500 sectors before the uptrend reasserts itself, you would be rather fine. The same for commodities and metals which were solidly trending higher before – oil, platinum, copper. E.g. look at yesterday‘s low platinum volume, or at the modest Freeport McMoRan decline – these charts are not broken while I see silver relegated to sideways trading (with a need to defend against the bears sternly) and silver miners taking their time.

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Monica Kingsley 1 month ago Author's comment

POST-FRI SUMMARY: The shape of the correction is being decided still. Tech missed a daily chance to reverse, IWM held up fine, EEM including its bonds are momentarily more pressured. SPX is in the middle, I didn't like the weak Fri finish across the board, but.stimulus cleared the House hurdle after the market close. While Fri didn't have the many hallmarks of a reversal, stocks are likely to like the TLT turn = again, this is a dip to be largely bought in my view. Just as gold or silver would welcome the Treasury yields reprieve - real rates are still around 1% negative = positive for gold.

Monica Kingsley 1 month ago Author's comment

TLT has indeed turned higher, and HYG appears wanting to repeat its yesterday's price action feat. When would gold and silver notice? VIX predictably down, XLK at 50-d MA only. SPX closing above 3865-70 would be good for Moday.

Great weekend everyone!