Market Watch For June 21-25, 2021 – The Return of Macro

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Last week I wrote that the “DXY – is the one head asset that is offering divergent price action. Watch to see how it breaks this past week’s range.”

That phrase turned out to be quite prescient as the US $ led sell-off took commodities and the equities lower and may have marked the change in narrative from inflation back to deflation.

Interestingly the long bond (TLT) continued its march higher even after the Fed signaled on Wednesday that they may be looking to taper sooner than expected with perhaps 2 rate highs next year.

Remember the old adage that the bond market is the smart money and perhaps the strength in the long bond is telling us that investors are pricing in deflation down the road and hence the continued rotation out of inflation-sensitive names and back into growth names – aka Tech/ARKK.

A few sessions do not make a trend and Friday’s trading may have been amplified by Quad witching but we’ll have to keep a sharp eye on whether or not the rotation from value back to growth continues.

The crypto markets are trading decisively with a bearish bias with many coins now trading with full-time frame alignment to the downside. Even though I am keeping a bearish bias I have to acknowledge that the bears have their work cut out for them if they want BTC and ETH not to trade inside month. If the buyers can keep the price action inside month I would consider it a small victory for the bulls and perhaps sets up for a bullish reversal next month/quarter.

Here are some of the ideas in this week’s video:

  • DXY – a price analysis of the bottoming in the USD and how I spotted the price reversal back in May
  • SPY/DIA/IWM – all saw selling going into this week’s FOMC with the selling pressure increasing to end the week. Price appears stretched in spots so a bounce wouldn’t be surprising. But watch to see if the bounce is faded.
  • QQQ – holding up well but if we see weakness across the rest of the markets I don’t expect the QQQ’s to be able to hold up on their own
  • TSX I’ve been wary of the rally in TSX for the last couple of weeks and if we see weakness in Oil expect more sellers and profit-takers.
  • EEM continues to show weakness and may be symptomatic of a weaker Chinese economy
  • Bonds – The long bond is now out-performing short duration bond (IEF) and so long as that remains strong this should be a good sign for growth names.
  • Gold – after failing to break above the monthly and yearly open – gold and silver broke to the downside sharply – the charts will take time to repair if we are to see higher prices
  • Bitcoin – the tight consolidation continues with last week’s lows still holding. My prognostication still stands – if last week’s lows hold then we may have seen the low for the month however if these lows break – watch out!

 

Market Watch For June 21-25, 2021 – The Return of Macro

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