Globex traders kept the overnight session inside yesterday’s range. But we are not too far from the all-time high pegged at 4539.50 on the continuous futures contract. Don’t take all-time highs for granted. We have reached the Weekly Expected Move high, so I don’t expect any gains to stick at higher levels until next week.
On the 10-year treasury rate, we are at the neckline of a head and shoulders reversal pattern. If broken, it implies a doubling of this key rate from 1.5% to 3%. That will be interesting for the stock market, to be sure. We are just over a week away from the next Fed meeting, which will become a focus by next week.
The Founders Group has a 165 point gain on each Emini contract in its 10% position from last week. We are tempted to ride the position up to and through the old high. However, we will be selling out the position on any strength today and tomorrow. We will look to replace it with SPY calls on a pullback to the 21-day line in the next week, depending on how the variables of inflation, market rates, and Fed policy come together.
Even with the strength this past week, a double top is still a possibility. Interest rates and inflation expectations are the keys. The stock market can handle a certain amount of both, but not too much. Use yesterday’s high and low as your gateways today.
A.F. Thornton