We would guess that in this scenario, the risk of a swifter break lower below our initial target range in the S&P 500 would increase if yields continue to rise, as it did coming into the fall of 1987 when Treasuries took their final leg lower.
Peaking around at other markets – a word of caution towards those dip-buyers in oil today. Should yields again trade lower, it’s a decent bet that crude would mimic the trend, as it has over the past year.
Although gold failed to capitalize on equity market weakness and break above its current cycle highs from July 2016, the modest retracement bounce in the dollar was largely at fault. Generally speaking, the cyclical unwind in the dollar continues to make progressively negative momentum (RSI) lows, an indication technically that further weakness is still unfurling, before a more tradable interim low is reached with likely a positive momentum divergence (e.g gold, circa 7/2013). Cyclically, the dollar continues to loosely follow the previous cycle decline, which remains naturally bullish for the euro and gold.
This article was republished with permission from Market Anthropology.
For more information on new fund products, visit our new ETFs category.