The next direction of the long bonds is crucial in determining the macro.
First, after a wrecking ball crash and ahead of the FOMC, we could surmise that a bottoming-like action defines the last several trading days. Our Real Motion indicator shows a mean reversion. The 10-day moving averages (cyan line) has not been pierced since September 1. Hence, with the rally in SPY (up .60%) and TLT closing slightly red (-.20%), we can say that as our Big View ratios go, risk remains on.
With so many different opinions, watching what TLT does versus the SPY makes it simple enough for you to form your own opinions about bonds, inflation, soft landing, recession, or–WHAT WE THINK IS–stagflation. If bonds remain underperformers to the SPY, even if both fall further from these levels, it keeps a risk on environment intact. Although, if stagflation becomes more obvious, it may not necessarily mean that equities are attractive to buy and hold.
Should TLT begin to outperform SPY, and we imagine TLT clearing the 10-DMA is a good start especially if SPY begins to sputter, than we can more readily say recession is in the cards and again, stagflation might be the more appropriate term.
The dollar (cash index illustrated).
Although the dollar rose from July until the peak high last week, until it fails 105.50, this correction from the peak looks like that–a correction, not a top. What has been so interesting is how the stronger dollar has given angst to foreign countries dealing with a higher chance of recession than the US is dealing with. However, certain commodities are unfazed, such as cattle, oil, sugar, and orange juice. Other commodities, by contrast, are more impacted, such as gold, while grains are more muted.
In a stagflation environment, the dollar and the long bonds (yield curve) could stay steady for longer. Commodities can still rise because of other conditions (war, weather, unrest, etc.), yet equities will most likely remain in a trading range or at least test a support level, with yields and the greenback strong. If the dollar and yields fall, commodities and equities can rise together, but at some point, commodities can continue going up until the rates are forced higher again.
It is a slippery slope for the FED and investors. Stagflation is the most difficult economic condition to reckon with.
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Mish in the Media
Mish joins Business First AM to discuss the market reaction to the war in Gaza in this video.
Mish discusses what’s needed for a market bottom on the Financial Sense Newshour podcast with Jim Puplava.
Mish takes over as guest host for David Keller, CMT on the Monday, October 9 edition of StockCharts TV’s The Final Bar, where she shares her thoughts in the daily Market Recap during a day of uncertain news.
To quote Al Mendez, “The smartest woman in Business Analysis @marketminute [Mish] impresses Charles with her “deep dive” to interpret the present Market direction.” See Mish’s appearance on Fox Business’ Making Money with Charles Payne here!
Mish covers bonds, small caps, transports and commodities-dues for the next moves in this video from Yahoo! Finance.
In this video from Real Vision, Mish joins Maggie Lake to share what her framework suggests about junk bonds and investment-grade bonds, what she’s watching in commodity markets, and how to structure a portfolio to navigate both bull and bear markets.
Mish was interviewed by Kitco News for the article “This Could Be the Last Gasp of the Bond Market Selloff, Which Will be Bullish for Gold Prices”, available to read here.
Mish presents a warning in this appearance on BNN Bloomberg’s Opening Bell — before loading up seasonality trades or growth stocks, watch the “inside” sectors of the US economy.
Watch Mish and Nicole Petallides discuss how pros and cons working in tandem, plus why commodities are still a thing, in this video from Schwab.
Mish talks TSLA in this video from Business First AM.
See Mish argue investors could jump into mega-tech over value and explain why she is keeping an eye on WTI prices on BNN Bloomberg’s Opening Bell.
Even as markets crumble, there are yet market opportunities to be found, as Mish discusses on Business First AM here.
Mish explains how she’s preparing for the next move in Equities and Commodities in this video with Benzinga’s team.
Mish shares why the most important ETFs to watch are Retailers (XRT) and Small Caps (IWM) in this appearance on the Thursday, September 20 edition of StockCharts TV’s The Final Bar with David Keller, and also explains MarketGauge’s latest plugin on the StockCharts ACP platform. Mish’s interview begins at 19:53.
Mish talks Coinbase in this video from Business First AM!
Mish looks at some sectors from the economic family, oil, and risk in this appearance on Yahoo Finance!
As the stock market tries to shake off a slow summer, Mish joins Investing with IBD to explain how she avoids analysis paralysis using the six market phases and the economic modern family. This edition of the podcast takes a look at the warnings, the pockets of strength, and how to see the bigger picture.
Coming Up:
October 11: CNBC Asia
October 12: Dale Pinkert, F.A.C.E.
October 26: Schwab and Yahoo! Finance at the NYSE
October 27: Live in-studio with Charles Payne, Fox Business
October 29-31: The Money Show
Weekly: Business First AM, CMC Markets
ETF Summary
S&P 500 (SPY): 435 resistance.Russell 2000 (IWM): 177 resistance.Dow (DIA): 338 resistance.Nasdaq (QQQ): 368 pivotal.Regional Banks (KRE): 39.80-42.00 range.Semiconductors (SMH): 150 resistance, 143 support.Transportation (IYT): 237 resistance, 225 support.Biotechnology (IBB): 120-125 range.Retail (XRT): 57 key support; if can climb over 61, get bullish.
Mish Schneider
MarketGauge.com
Director of Trading Research and Education