Weekly Macro Analysis
Bearish clouds on the horizon
This week we saw a strong performance by the stock markets overall, especially the Dow Jones, which is on an 8 day up streak.
Yet I want to issue a warning as my Risk Signals keep deteriorating and next weeks CPI data and OPEX will probably force a decisive price action by the markets.
SPY to me looks like we are reaching some resistance next week:
BTC/QQQ a ratio I like to watch for Risk On/Off environment already got rejected this week, and in the past stock indices tended to follow the lead of this indicator:
Could the CPI data next wednesday be a catalyst for selling?
In my opinion the markets have priced in higher for longer and a more inflationary theme without losing much ground, as the underlying assumption is tat the US economy is strong and other economies around the globe are starting to recover.
With that assumption the market reacted positively to news of a slowing economy like higher unemployment, less than expected wage growth, lower housing permits and lower new factory orders, because this could make the FED cut rates earlier…
If that assumption is flawed and the US economy is actually in a worse shape than expected, a cooler than expected CPI could mark a turning point for the markets and the sentiment, as last year everybody was prepared for a recession, but this year I listen to the same experts being bullish on the US economy…
Will they be wrong again?
A cool CPI with markets going down is definetly not the most common expectation, but that is exactly what I am waiting for as a signal to go long bonds and short stocks.