Good morning!
If you blinked yesterday, you missed the “correction”.
After the SPX hit a new high, the market moved down about 1% then proceeded to wipe the loss by the end of the day. This morning, markets are higher with the NASDAQ leading and the RUT lagging.
Ten-year bond rates dropped yesterday over 5%, and today another 4.6%. That is a significant drop and for me, it is another red flag.
The bond market is pricing in future deflation, which is counter to what normally happens in a strong bull market. On the other hand, rates are moving towards more normal ranges prior to the pandemic.
So if you think that inflation is a problem for the market, it’s not. I still believe that there will be more of a pullback soon but may not come until the market takes out additional highs.
You just have to trade what’s in front of you. Today we will get the Fed minutes at 2 PM eastern, which usually gives us some volatility at the time of the announcement.
Talk soon,
Al Losada
Founder | SimpleOptionStrategies.com
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