From the desk of Joe Rios
Volatility hit the risk assets with the Russell 2000 sliding -4.8% followed by Crude Oil -4.7%. Risk OFF sentiment dominated most of the week with the US 30 Yr Bond rising 1.8% while the S&P 500 dropped -3.4%. Other markets reacted as the Japanese Yen rallied 2.1% as carry trades began to unwind. Gold and Silver also rose along with the US Treasuries as correlations continued throughout most of the week. In the Forex market most of the major currencies consolidated with the US Dollar slipping -1%. Earnings season kicks off this week taking center stage for most traders and investors alike. I will pay special attention to how the markets react to corporate guidance as well as company earnings. My focus will remain on the US 10 Yr Note futures as a leading indicator for the direction of risk asset s. Correlations have been tight between the benchmarks providing cue to market behavior, therefore I will continue until the market dynamics change. Take special note of the illustration below with the two main benchmarks. The S&P 500 broke from the long term bullish channel and is close to testing the RQ Channel low 2 and 7 indicators. Will this week’s corporate earnings or an upbeat earnings outlook help prices bounce? Or will a weak earnings outlook push prices through the RQ Channel’s key level? Conversely, the US 10 Yr Note closed the week at the RQ Channel high 2 and 7 level. Will the US 10 Yr Note consolidate at this key level or push higher? Or will it be economic data from China to trigger the next move?
Joe Rios – Chief Market Strategist
Weekly chart of the S&P 500 and 10 Yr Note futures.
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MONDAY
Economic Data Release – Market Movers
CNY – Trade Balance – Tentative
AUD – NAB Business Confidence – 8:30 PM ET
TUESDAY
Economic Data Release – Market Movers
GBP – CPI – 4:30 AM ET
EUR – German ZEW Economic Sentiment – 5:00 AM ET
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Economic Data Release – Market Movers
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GSP – Average Earnings Index – 4:30 AM ET
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Economic Data Release – Market Movers
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FRIDAY
Economic Data Release – Market Movers
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