Futures reached new all-time highs overnight, ostensibly on hopes that the FOMC will cut rates in July. While I’d never discount the importance of Fed guidance, futures were initially reversing lower until oil and VIX opened the door.
First, there was VIX’s breakdown through a very obvious TL. Algos eat this stuff up.
If that wasn’t enough, VIX put a “shot across the bow” at 4am……when ES had the audacity to balk at making new highs.Then there was CL, which broke out of its falling channel on Tuesday and has ratcheted higher ever since — even breaking out of its rising wedge a short while ago — again, when ES threatened to reverse before reaching new highs. War with Iran might not be good for people (or other living things.) But, it’s great for algos which feed off of ramping oil prices to produce higher highs in equities.
The more interesting development is the breakout in gold……and the expected drop in the 10Y — which should test 2.00% this morning. As we anticipated, the 2s10s is widening….…thanks to the fact that the 2Y is dropping even faster than the 10Y. Stocks might be ignoring it for now, but this is the most bearish scenario that could play out.
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