Short-term Equity and Treasury lows are in place, but intermediate-term challenges remain

SPX and QQQ have made their short-term bottom as of last Friday and are now likely on a three-wave bounce into late next week.   Interest rates can drop further into next week, but likely will not make the larger breakdown many are expecting before pushing back to highs into mid to late November.  Overall, given widespread technical damage in many sectors it’s going to be important to see more evidence of a rolling over in both US Dollar and Treasury yields to have confidence of a sustainable rebound.

The early day bounce in SPX to test its former October lows near 4216 was a bit deceptive Wednesday, as more than eight sectors were negative on the day, and Technology in Equal-weighted terms was negative despite a big rally in $XLK.  

Fortunately for the Bulls, this changed dramatically post Powell’s comments at November’s FOMC meeting.   Of the former eight sectors which showed lower prices into Europe’s Wednesday close, three rallied back to positive territory and only Energy, Materials, Industrials, Communication Services and Staples finished negative. 

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