European markets traded down in the overnight session, as many european nations continue to struggle with COVID-19, and the effects of lockdowns on the economy. Bitcoin bounced back immensely from a 32K handle back to 36k, no surprise there. The 10Y yield is skyrocketing (seemingly unnoticed), and hit a high of 1.175% overnight. We've discussed what the implications of this move might be, and where rates may be heading next. For those of you who haven't been following, the 10Y yield is now up 130% since the beginning of August. Having said that, there's a possibiliy the FED may continue to change the rules of the game, and institute yield curve control (YCC) in the near future, to continue to artificially suppress rates. The mere fact that everything they've done to this point, hasn't worked, is no surprise to me. How could they have solved any (real) economic problems, when they're implementing solutions that simply aren't effective for main street?
According to Nomura, CTA's could turn short US Treasuries at any moment, due to the fact that we've now breached the key 1.10% level. This would result in a market correction of about 20% according to analyst projections at Morgan Stanley . We've been seeing downward pressure in the bond market in recent months, as the mere mention of tapering asset purchases by members of the FED, spooked bond investors. The dollar has held onto a 90 handle overnight, but is seeing some pressure here as the base case remains to be further dollar debasement. Oil is rallying hard, and is back to 10 month high's as of this morning, and we're now back at a 53 handle. We may see some pressure in oil markets as the week progresses, due to the anticipation of shrinking demand, and Exxon apparently finding a new massive reserve in Guyana.
Gold is looking awfully toppy , and we're seeing a clear reversal on the monthly candle, with both the , and rolling over. SPY is back at the 21EMA on the hourly, and looking weak as we approach the open. The weakness could be attributed to the circulation of a new report by Goldman discussing the rise in real rates, and it's potential impact on equity prices. Trade accordingly!