Daily Market News - 30th June 2022
The Bear Market Keys
If you picked up last weeks letter, you’ll know I was calling for an oversold rally higher, if you missed that, you can read that HERE .
While that’s exactly what we got in the most beaten up areas of the market, it’s worthwhile remembering we’re in a bear market and also on the cusp of a recession.
Stocks as an asset class tend to go down in that environment and with it being quarter end, that means rebalancing and chop today.
Could we rip higher? I’m open to it, but the overall data suggests it would be a short term move higher if we do see a rip.
With that in mind, In this weeks letter I’m going to share some of the charts and commentary I’ve put to our clients and members over the last week, so lets get into it.
Let’s start with Volatility, because it’s a biggeeee.
Volatility (VIX) and Credit Spreads (IEI/HYG)
You might have seen this chart the other day, I posted it to Twitter (FOLLOW ME HERE) and what the chart is essentially communicating is the correlation these 2 areas of the market have with 1 another.
We already know when Volatility spikes, that’s probably an environment where stocks are under pressure and with Credit Spreads starting to move, the logical conclusion to take is to anticipate a potential move in the VIX, which I probably should also add is making higher lows.
Our note in our recent client / member weekend Analysis said
“Most charts are a complete mess and while there are charts that could have bullish implications, I only see chop ahead. You can expect to see volatility move when VIX hits lower end of the range.”
8 Days ago in our Midweek Half Time I also communicated,
“Many of the crappiest names with the worst charts / fundamentals will move 20-30% without thinking about it.”
These short term rallies are being sold off and I want to pay attention to that information.
In a bear market, rallies generally give an opportunity to load up on short positions.
How about the US Dollar?
US Dollar Index (DXY)
I’ve been talking about The Us Dollar for months and been shouting from the rooftops that the US Dollar is a massive headwind for stocks and while this chart is ripping higher and making new 52wk Highs, it’s very difficult to make longer term bullish call beyond the 1-3 day rebounds we see here and there.
This is also a monthly chart, and when the market closes out the quarter today, I expect this chart to confirm a break out.
For me to get meaningfully bullish, the US Dollar and the 10yr yield need to roll over. (which they absolutely could on a moments notice) - something I’ll be on top of.
Lets look at Bonds.
20Yr Treasury Bond ETF (TLT)
There are small signs of life developing in TLT.
Traditionally a defensive safe haven asset, it’s been taken out to the woodshed over the last few months like stocks have, but if it’s going to rebound, this MIGHT be a place for that to happen. I’ve added a 50 Day Simple Moving Average because charts have a nasty habit of running into these levels and selling off so it’s 1 where you can keep a tight leash.
Last night in our Midweek Half Time, I put 10 charts to our members for consideration over the next week.
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To all my US followers, have a great 4th July Weekend.
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