Inside Markets — Decelerating Momentum
Decelerating Momentum
July 26, 2024
The NDX reached short-term oversold status earlier this week with yesterday’s late-session sell-off showing signs of decelerating momentum. From a technical perspective only, today’s countertrend rebound isn’t a surprise. Downside in the NDX can be attributed to ‘cyclical rotation’ and crowded positioning. The cyclical rotation followed steepening in the 5/30 yield curve on rising expectations for a September Fed rate cut. The 5/30 curve made a double bottom at -38bp in October of last year with the recent rally breaking above the downtrend at +22bp to +37bp. The break above +22bp caused a position squeeze that may or may not be the beginning of a lasting cyclical rotation. Markets move in advance of data/events and while the RTY should rally in advance of a cyclical recovery, so should copper prices – but they’re not. In fact, copper prices have fallen ~18% since late May with two-thirds of that decline occurring after the CPI-induced rally in the RTY.
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