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: