Equities remain stuck in a narrow price range since reaching our IH&S target on the 19th. Ordinarily, we’d see a retracement afterwards. But, these are hardly ordinary times.

Among other issues, rising oil prices have pushed the 2s10s up to our 20 bps target.

continued for members…

This is a quandary for the markets. If the 2s10s breaks out further, it will be a serious drag on equities, potentially leading to a correction or crash. If it retracts, we’re more likely looking at a milder setback.

So, we’re alert to the possibility that rising oil prices will drive the 10Y (and 2s10s) higher or the 2Y lower. With tensions escalating in the Middle East, it’s anyone’s guess how much oil prices and bond yields might move.

As long as equity prices remain in this range, it seems safer to be on the sidelines. If SPX should break decisively above 5727 then there is another few percent that could be captured.

Stay tuned.