The DXY is breaking 104 (First time since March) as traders/investors gear up for rate cuts.
Rate cut probabilities are showing a 98% chance of fed easing by the September 18th meeting.
Why? Because the jobs market is showing signs of cooling, and inflation is trending lower again overall. Services PMIs also had a big role to play, showing weaker outlook for the powerhouse component of the US economy.
Does this mean the dollar will fall for months on end? Not necessarily. But - the selloff in USD is likely a repricing of the dollar, now that the US outperformance gap is narrowing a bit.
Rate cut probabilities are showing a 98% chance of fed easing by the September 18th meeting.
Why? Because the jobs market is showing signs of cooling, and inflation is trending lower again overall. Services PMIs also had a big role to play, showing weaker outlook for the powerhouse component of the US economy.
Does this mean the dollar will fall for months on end? Not necessarily. But - the selloff in USD is likely a repricing of the dollar, now that the US outperformance gap is narrowing a bit.
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RUSSELL
The small caps are making their way back up as they are considered a catch up trade to the rest of the markets. As the tech and big name trade dwindle, the rest of the market (smaller companies) are finally starting to see more demand. This is likely due to the three interest rate cuts that are now forecasted for this year. If this trend continues, price may even end up retesting the highs around $244-45 on the 1M timeframe.
-Frank
The small caps are making their way back up as they are considered a catch up trade to the rest of the markets. As the tech and big name trade dwindle, the rest of the market (smaller companies) are finally starting to see more demand. This is likely due to the three interest rate cuts that are now forecasted for this year. If this trend continues, price may even end up retesting the highs around $244-45 on the 1M timeframe.
-Frank
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S&P 500
Although not a big drop today, it seems like the rotation could be starting to take a toll on the big name indices. Price struggles to break above a rising trend line on the 1D timeframe and is reading overextended on our custom Bollinger band indicator. The SPX500 may need to drop back a little bit before investors want to get back in. Support lies at $5,500.
-Frank
Although not a big drop today, it seems like the rotation could be starting to take a toll on the big name indices. Price struggles to break above a rising trend line on the 1D timeframe and is reading overextended on our custom Bollinger band indicator. The SPX500 may need to drop back a little bit before investors want to get back in. Support lies at $5,500.
-Frank
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Gold is also overextended, but for a much more bullish reason. The bullish concept behind gold and possibly bitcoin is that regardless, the Fed is going to cut this year or next. The anticipation of a weaker dollar is high upon knowing this. Over time, the precious metal may be able to find more demand. Especially if indices like SPX, NAS and US30 start catching more downside, gold looks increasingly bullish. Don’t expect a perfect run to the upside, however. Gold might be the new trade to look for pullbacks on.
-Frank
-Frank
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DOW remains strong despite big tech stocks tumbling on lesser demand. Yields continue to fall which is bringing more attraction to the dividend stocks which offers some yield on owning these stocks. The sign of a Fed cut in September is not a bullish sign for everything apparently.
Data from the A1 EdgeFinder
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Tech stocks can't seem to catch a break on the latest interest rate news. Highly speculative positions are souring to the fact that dividend stocks are becoming more attractive. If you look at a market heat map, you can see that only the mega caps have been struggling the most this past week while the rest of the market is keeping other areas stable.
The question is whether this new trend is sustainable or not. Later on we will look at a similar pattern unfolding right now that is eerily similar to 2008. It looks like NAS100 could come down to test the rising trend line on the 1D timeframe before another directional decision.
The question is whether this new trend is sustainable or not. Later on we will look at a similar pattern unfolding right now that is eerily similar to 2008. It looks like NAS100 could come down to test the rising trend line on the 1D timeframe before another directional decision.
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RUSSELL stocks struggle today with the rest of the market, but their losses are far less severe. The highly sensitive interest rate index has currently topped at $226 share price on IWM. If small caps continue to push further to the upside however, we could see IWM touch somewhere in the low $240s.
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Here are three charts, one of SPY, the other QQQ, and the last is IWM. Take a look at each of the candles highlighted in the green boxes. Notice on that month, we saw a harsh decline in all three indices, but IWM behaved differently.
We talk about the catch up trade for small caps and the great rotation out of mega caps into smaller companies. Although there is money flow allocation throughout these indices, how sustainable is it? If we look at 2008's rotation, small caps saw an incredible increase in demand before turning back the other way. IWM hit an all time high before ending the month at a major loss. It seemed that the big names fell initially, but small caps suggested there was a rotation going on. This only took investors by surprise when everything dropped, and the rotation was not within the market, rather, it was just completely out of the market.
We talk about the catch up trade for small caps and the great rotation out of mega caps into smaller companies. Although there is money flow allocation throughout these indices, how sustainable is it? If we look at 2008's rotation, small caps saw an incredible increase in demand before turning back the other way. IWM hit an all time high before ending the month at a major loss. It seemed that the big names fell initially, but small caps suggested there was a rotation going on. This only took investors by surprise when everything dropped, and the rotation was not within the market, rather, it was just completely out of the market.
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Now let's take a look at this month's price performance.
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They say history doesn't repeat itself, but it can rhyme. This time around, the SPY is still green, but the QQQ is turning red on an inverted hammer candle for the month (pretty bearish sign should the candle close in that fashion, but we still have a few weeks left in the month).
IWM, however, looks like it's doing the same thing as that September in 2008. Maybe the small cap index touches new highs, or maybe it pulls back like the big tech market. The reason I'm watching these market with caution is because this "catch-up" trade that everyone is so eager to be in, could be a trap.
I think it's reasonable to finally see the small caps finally moving with the rest of the market, but it could be the last part of this melt-up before some kind of correction. Time will tell as the month wraps up.
IWM, however, looks like it's doing the same thing as that September in 2008. Maybe the small cap index touches new highs, or maybe it pulls back like the big tech market. The reason I'm watching these market with caution is because this "catch-up" trade that everyone is so eager to be in, could be a trap.
I think it's reasonable to finally see the small caps finally moving with the rest of the market, but it could be the last part of this melt-up before some kind of correction. Time will tell as the month wraps up.
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