John Caruso
Senior Market Strategist
Market Risk:
Stocks: SP500 lost -1.8%, Nasdaq -2.1%, and the Russell -2.8%. Interests rates have been pricing in 5.50% for the terminal Fed Funds Rate since last Wednesday (up from 5.00% just 4 weeks ago and 5.25% 2 weeks ago), and to think stocks “had it all priced in” from the start of the year? You can map this move back from last Wednesday’s VIX expiration when it was suppressed on 0dte and closed at 18.23, only to close at 22.87 yesterday. The downside in equities is likely not over with from my estimation, but the SP500 did finish immediate OS yesterday with the VIX immediate OB.
Bonds/Yields: 10yr yields finished at 3.95% yesterday and the 2yr at 4.67%. The cycle high for the 10yr was 4.33% and 4.74% for the 2yr (thus far). Will the 2yr push past 5.00% is the question at the moment? I don’t know. I can tell you that in every typical rate hike cycle the 2yr has been a good benchmark indicator for how high the Fed actually gets. So if its probable that the Fed will hike to 5.50%, then its probable that the 2yr will visit that level. When the Fed has gone too far with its rate hike cycle, you’ll see it in the bond market first! We’ve heard the prospect for a 6% terminal rate by credible sources – but again I’m not so sure. What I do believe is that current levels of bonds will be viewed as favorable entry points by yearend/into 2024.
Keeping it tight this morning, back soon.
| Market | Trend > 6 mo | Range Low | Range High | Momentum | OB/OS |
| SP500 | Bearish | 4003 | 4139 | Neutral | 14 |
| Nasdaq 100 | Bearish | 11,873 | 12,648 | Neutral | 14 |
| Russell 2000 | Bearish | 1876 | 1946 | Neutral | 34 |
| 10yr Yield | Bullish | 3.62% | 3.98% | Positive | 54 |
| VIX | Bullish | 19.44 | 22.41 | Positive | 89 |
| Oil | Bearish | 73.91 | 80.36 | Neutral | 21 |
| Gold | Bullish | 1822 | 1892 | Negative | 50 |
