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Markets Struggle at the Highs

June 17, 2024
Frank Cabibi

After starting off the month with numerous heavy news events, the S&P 500 and NASDAQ both ended up at all time highs. Now the question that remains is whether or not this trend can continue. Here is my outlook on USD-related assets.

10 year T-notes are now very bullish on the EdgeFinder for several fundamental reasons. As yields continue to stay below 5%, the market anticipates a rate cut by September. Inflation showed a slight cooling in the US, while labor remains relatively steady in accordance with the Fed's plan of a soft landing.

Although there is still a possibility the Fed won't cut in September, current sentiment suggests lower yields. In turn, the price of these bonds will likely rise unless we see a hawkish shift in the Fed's tone.

The S&P remains on an incredible run from October's lows of 2023. We are now breaching to new highs on the index at the time of writing this. It seems as if the direction is set for the summer. There is not much else to see from the fundamental data until next month and August.

If the rate cut chances stay favorable in September, the market may continue to slowly push higher during the summer months. Until we see that shift, if it comes, it will be hard to trade against the upside on this trend.

Gold still remains bullish as it sits one point away from a strong bullish reading. Smart money continues to slowly buy up this metal and is the most longed asset on the EdgeFinder. Aside from NFP, labor has been on a steady decline for the past year.

This in turn with falling yields could be a great setup for gold's strength. On top of that, GDP, PMI and retail sales numbers seem to suggest an overall slippage in the US economy. Stubborn inflation is what could be causing the slower output.

Retail Spotlight

Retail's major short positions lie in the equities market and the dollar. The S&P is now 73% shorted by traders, and Ethereum is nearly 90% long. Gold and other indices remain mixed for the time being.

Smart Money Spotlight

Smart money is getting bigger positions in oil and bond notes. Gold is seeing little bullish change but remains as the most bullish COT position. Meanwhile, US30, NAS and SPX change red. USD is basically unchanged.

Fundamental Spotlight

Inflation data in the US has not moved enough to suggest a rate cut yet. However, if Fed predictions leave us with one this year, it is still enough to get investors optimistic about the market again.

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