It appears that towards the very end of last quarter we hit a major inflection point in the trend of higher dollar and rates and lower stocks, and anything perceived as risky. While the longer-term outlook appears likely to continue supporting the first half theme, corrections will happen. It is even possible the correction in recent trends will have the market thinking the worst is behind us.
At any rate, I’ll take it one step at a time. For now, a recovery rally in stocks and bonds is anticipated while the dollar falls. The S&P 500 could rally up to around 4200, while the 30-yr ultra rallies to 160 or higher. The DXY could ease back inside the multi-year range towards the 100 level.
The S&P 500 isn’t necessarily bouncing from a highly notable level but the price action and sentiment suggest we have seen the worst for now.
S&P 500 Weekly Chart
The 30-year took out the 2018 low and reversed back above, suggesting we saw a wash-out.
30-yr Ultra Bond Weekly Chart
Failing to stay outside of the multi-month range is setting up the DXY for selling.
DXY Monthly Chart