Mish’s Daily: It’s All About Risk and the Long Bonds
Written by Michele ‘Mish’ Schneider
Monday, after a lot of spooky headlines, the SPY touched the 23-month moving average or the 2-year biz cycle breakout point right around 417.
Now, the big question is can IWM close out Oct above 170?
If not, any rally will be short-lived.
Today was an interesting day.
SPY also cleared back over the 200-DMA which if holds, could mean more relief rally.
BUT-TLT reversing as well so what we don’t want is for the long bonds to outperform SPY.
1. That would be risk-off and recessionary
2. It would embolden the already bold commodities to run-especially with the dollar falling.
Which we see as #stagflation.
From a technical standpoint, yes, this is a mean reversion.
However, if you look back to July, it is the 5th oversold rally in TLT.
The biggest fundamental dynamic is that inflation can go hyperbolic (it already is in certain soft commodities because of the geopolitical soup).
And, if the FED relaxes now, one must wonder if they will be caught from behind once again.
Bulls want TLT to underperform both.
Note the ellipses and text on the chart of TLT or the 20+ Year long bonds.
Back in March when we had the bank crisis flash crash, bonds signaled a flight to safety by outperforming the SPY starting March 7th.
At the same time, the price was around 101.
Real Motion was showing a bullish divergence in momentum as TLT crossed over the 50-DMA long before the price did.
SPY crashed, and TLTs rallied to 109.10 in a matter of days.
Fast forward to today, TLT remains slightly underperforming the SPY.
The momentum indicator shows a mean reversion but not a bullish divergence.
Should TLT do what it did in March-outperform the SPY-take that as a warning.
That is a sign of risk off, and perhaps a harbinger of an oncoming recession-or worse, stagflation.
Let’s not freak out yet though. It is always good to plan ahead yet act on price accordingly.
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Mish in the Media
BNN Bloomberg Mish covers her stance on earnings, the macro and 3 very different stock picks 10-23-23
Your Daily Five Commodities 10-20-23
Crypto Town Hall X Space 10-20-23
Business First AM Garmin 10-18-23
Business First AM 10-17-23
FACE ForexAnalytix Pre market 10-12-23
CMC Markets Daytrading Commodities 10-11-23
Final Bar Sub Host for Dave Keller 10-09-23
Making Money with Charles Payne Fox 10-05-23
Yahoo Finance 10-05-23
Real Vision 10-04-23
Kitco on gold 10-04-23
BNN Bloomberg Opening Bell 10-04-23
Schwab with Nicole Petalides 10-02-23
October 24 Benzinga Pre Show
October 26 Cheddar TV on the NYSE
October 27 Live in Studio with Charles Payne Fox
October 27 Live in Studio Yahoo Finance
October 27 Recorded in Studio with IBD
October 29-31 The Money Show
Weekly: Business First AM, CMC Markets
November 1-13 VACATION
S&P 500 (SPY) 417-420 support
Russell 2000 (IWM) 170 now in the rearview mirror
Dow (DIA) 332 pivotal
Nasdaq (QQQ) 351 recent low and support
Regional banks (KRE) 35 next support
Semiconductors (SMH) 140 support
Transportation (IYT) 225 pivotal
Biotechnology (IBB) Under 120 so 110 area next support
Retail (XRT) 57 key support still