As we’ve discussed every day for the past week, the 2s10s is sounding an alarm that should have equities very concerned.

continued for members…

The problem is that the 2Y yields are falling faster than the 10Y. In other words, the yield curve is normalizing back toward a positive slope. At -13 bps, it would top the Jan 2024 and Oct 2023 highs – a very clear indication of a breakout, which is very bad for stocks. There are also a number of earnings/outlook disappointments in the news – particularly Tesla and Alphabet.

Futures are off sharply, with ES heading toward its SMA50 if the previous lows can’t hold.

VIX, which plunged to below its SMA200 yesterday, is now exhibiting a bounce off of it.

Between EURUSD backing off its breakout opportunity and USDJPY screaming toward our SMA200 target, currencies aren’t helping. Oil and gas continue to slip, relieving some of the inflation pressure.

New home sales are coming up at 10am. If shelter, PMI, GDP, income and PCE all come in weak, a July rate cut suddenly starts to look like a possibility.

Stay tuned.