As bond yields and the dollar continue to increase, hopes of an earnings-driven rally seem to have quickly faded as the recession worried markets struggle with overhead resistance.  At this point, we seem to have a tick-for-tick correlation between the indexes and the price movement of the indexes.  So expect the wide-ranging price swings to continue with a light day of earnings and economic data.  With so many attempts and failures to break through resistance levels, keep an eye on price supports because it’s not hard to imagine that the bears could resume control.

Asian markets closed mixed but mainly lower as rising rates and recession fears persist.  With the U.K. in political turmoil and European markets trading red across the board this morning, monetary pressures grow with the rising dollar.  Although U.S. futures try to rally off of overnight lows in the premaket pump, the relentless rise in bond yields continues to steal the wind from the sails of the earnings rally hopes.  Plan for the uncertainty to continue as long as the yields and dollar continue to rise.

Economic Calendar

Earnings Calendar

We have a lighter day on the earnings calendar with around 20 confirmed reports.  Notable reports include AXP, HCA, HBAN, SLB, SMPL, & V.Z.

News & Technicals’

The race to find Truss’ replacement is already well underway.  Candidates vying to succeed Truss as prime minister have until 2 p.m.  London time on Monday to gather the support of at least 100 Conservative Members of Parliament to run.  It is an exceptionally high bar of nominations for a party composed of 357 MPs and caps the number of candidates able to contest for the leadership to a maximum of three. 

Defense analysts say evacuating civilians from the occupied Kherson region in southern Ukraine could set the scene for another Russian withdrawal.  Up to 60,000 civilians are expected to be evacuated in the next few days from the part of the Kherson region on the west bank of the Dnipro River.  Aluminum is the latest casualty of global economic headwinds as prices sink amid alleged dumping of Russian aluminum, weakening global demand, and soaring operational costs.  Earlier this week, aluminum stocks in London Metals Exchange (LME) warehouses leaped, sparking concerns about the potential dumping of Russian-origin aluminum.  The White House had already considered a ban on aluminum imports from Russian producer Rusal.   Russia is not only a major producer of primary aluminum but also embedded in global supply chains needed to make the metal, bauxite, and alumina.

The yield on the 10-year Treasury hit a fresh 14-year high on Friday, while the 2-year note traded in the territory last seen in 2007, making a 15-year high as signs of a recession worried markets.  As a result, the U.S. dollar continues to gain strength and has become almost tick-for-tick correlated with the major indexes.  Currency fluctuations and growing concerns of a treasury liquidity crisis are impacting the major banks just days after surging on better-than-expected earnings results.  With a light day on the earnings and economic calendars, it may be difficult for the market to find inspiration unless something changes in bond yields.  The earnings-driven hope of relief seems to have quickly subsided, so keep a close eye on price supports because it’s not difficult to imagine new market lows.

Trade Wisely,

Doug