There is an old market saying that the bears feast at Thanksgiving - not so this year. The rebound in U.S. equities, which started mid-November, continued this week but Coach Dale remains a stubborn bear when it comes to stocks. Not so elsewhere. Unlike last week, when he didn’t want to be long anything, Dale sees some interesting opportunities starting to take shape. Let’s break it down.
Bond Breakout. Treasuries were the big story this week for Dale. If the Fed is poised the cut rates next week, as most investors expect, then why are prices falling / yields rising? That is a worrying sign for Dale. He’s keeping a close eye on support for TLT around 88-1/2. It has been tested repeatedly and, “…the more an important area gets tested, the weaker it becomes. It’s like trying to knock a door down. It may not happen on the first attempt, or you may dislocate your shoulder, but by the third attempt that door is going to open up and cave and that’s what is happening in TLT right before the Fed.” Why? Dale is watching the one-two punch of an FOMC and BOJ meeting this month as part of the catalyst which will put upward pressure US gov’t bond yields. A retest of the April high in yields / lows in price is not out of the question in his mind.
Dollar Not Done Yet. The debasement trade is mainstream now, but Dale thinks there is the potential for a short term dollar rally that catches investors flat footed. While many are forecasting a drop in DXY down to 90 or 85, Dale’s charts tell him there is greater risk the greenback takes a run at 97 or 98 and possibly higher before resuming its downward march. His call reminded me of last month’s For The Record Conversation with Warren Pies when he reminded us that we can have shorter term cyclical moves within a larger secular trend.
This Bear Is Not Going Into Hibernation. With the S&P 500 a layup away from new high, many stock bears have thrown in the towel and hopped on Santa’s sleigh, but Dale remains very wary of this rebound. “I still think this is a dangerous market here. …If NVDA was performing…(but it’s not) and even some of the other strong semis are not performing or peaking ..and we still have the risk asset Bitcoin under pressure.” Dale is not ruling out a melt-up, but this does not look like a bottom to him so he is advising extreme caution.
Crude Reality. Oil rounds out Dale’s contrarian calls of the day. West Texas Intermediate crude prices have been pegged right around $60 a barrel for months and Dale feels like a lot of the bearish news is already priced in. What’s not priced in is the geopolitical risk that still lurks. While more lows are possible, Dale is going to be looking for opportunities to position for a breakout to the upside. With so many investors short crude, he feels it won’t take much to push prices up to $80 a barrel.
As always Coach shares his charts and maps out all the price targets and levels he’s watching so get your notebook ready as you watch the video and be sure to join me and Coach live next Friday with any questions you have.
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