Please enable javascript in your browser to view this site!

Dollar Decline causes S&P Reversal, Flight to Safety in Gold, Treasuries

Overall, the US Dollar's decline post FOMC yesterday set the tone for the S&P to move higher initially, but Treasury yields might have given the bigger clue, and always important to watch when Stocks and bonds start moving in unison after weeks and months of moving opposite.  The unfolding in the Dollar vs Japanese Yen, and overnight flight to safety with Gold rallying further has resulted in yields pulling all the way back to 1.86 on the 10-yr, a key area of support.  USDJPY meanwhile, has made a more severe breakdown down to its own important line in the sand at just North of 111, while S&P remains well above its own key area at 1995.  (Futures dropped nearly 17 handles from overnight highs)  For now, a warning sign of a possible larger reversal after a 12% run in stocks within the last four weeks, but the key will be breaks of 1.85-6 for TNX, breaks of 111 by USDJPY and violations of 1995 by S&P Futures. 

Given the US Dollar breakdown to multi-month lows last night by DXY, Materials and Energy should be favored for strength, along with sticking with Utilities for now, which still look too early to fade given a possible breakdown in Yields.  Gold and Silver stocks in particular look attractive after Wednesday's move and should rally further given Thursday morning strength in Metals.


 

S&P has erased all of Overnight gains given Repricing of Risk, flight to safety- 1995 important

S&P has erased all of Overnight gains given Repricing of Risk, flight to safety- 1995 important