The markets were flat ahead of this week’s inflation data and tomorrow’s employment benchmark revisions, which are due at 10 AM and expected to decline by 598,000. The PPI report comes Wednesday, followed by CPI on Thursday. In addition, there will be 3-, 10-, and 30-year Treasury auctions this week, setting up significant settlement dates next week. As of now, September 15 is set to settle for $78 billion.

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SOFR rose to 4.42%, which is a relatively high level for this time of the month and signals a lack of liquidity in the funding markets. So far, the Standing Repo Facility hasn’t been triggered, which suggests that while liquidity remains sufficient, it is becoming tighter and more expensive to borrow.

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It isn’t likely to improve much tomorrow either, since today the overnight general collateral rate averaged around 4.44% for the second day in a row. As a result, SOFR may remain unchanged or even tick up to 4.43% or 4.44%.

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So far, liquidity hasn’t impacted the broader market, but parts of it have stalled. The semiconductor SMH ETF is one example, having consolidated since mid-July. Its RSI has been trending lower, suggesting a shift in momentum. It’s possible to identify a diamond reversal top pattern forming, though these patterns are tricky, as they can also represent bullish consolidation.

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It may not even be Nvidia that determines the sector’s direction—it could come down to Broadcom (AVGO). The stock is trading two full bars above its upper Bollinger Bands, with an RSI above 75. It’s rare to see a stock this far above the bands and with such a high RSI at the same time. In the past, this has suggested that Broadcom may either pull back or at least consolidate sideways. More often than not, it has resulted in a pullback.

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30-year Treasury yields fell for a third straight day, closing at 4.69%. This is a concern because it appears the symmetrical triangle has broken lower, with a decisive close below support at 4.8%. That breakdown could point to a move toward roughly 4.3%.

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The problem is that inflation expectations haven’t really come down. One- and two-year swaps are lower, but only slightly. Even the five-year swap is trading at 2.55%, which remains above the breakout level of 2.53%.

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The next few days of data will be very telling, that’s for sure.

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