We’ve stuck stubbornly to our forecast for the 10Y to reach 4.75 for nearly a year, betting that sticky inflation would force the Fed’s hand. We came within 6 bps of new highs this morning after retail sales soared 0.7% (expected 0.4%) in July.

Futures held on to their lows, though the pre-opening shenanigans haven’t yet begun (keep a close eye on DXY and VIX.) We don’t expect the bulls to give up SPX’s 50-day (4443.43) without a fight.

The challenge for bears now, as back in October 2022 when the 10Y tagged our 4.26 target [see: More OPEX Games] is that we’re up against OPEX (Friday.)  Back then, it meant the 10Y’s channel collapsed and the next leg higher was postponed until after equities’ year-end run for the barn. If TPTB have their way, SPX’s 50-day backtest would be a springboard for a nice bounce.

continued for members…

EURUSD has a date with its SMA200, but as we’ve discussed it might be postponed until the SMA200 reaches the yellow channel line. Likewise, USDJPY is still angling higher with its .886 in sight. All this puts DXY in a tough spot, with its SMA200 just above likely to pose a challenge to higher prices.We’re still looking for CL and RB to hold at or below recent highs, which would also tend to put a cap on rates.

But, of course, it’s not just energy prices powering the strong economic data.

The 10Y is threatening new highs while the 2Y is standing pat with another lower high.

This means the 2s10s will become that much less inverted, increasing the prospects of a larger correction.This obviously depends on whether or not the bears can force SPX below its SMA50 – currently at 4443.43. If so, the next support doesn’t come in until  4311. A bounce, however, could easily push up to the .886 at 4667.

Stay tuned…