The Weekly View - April 12

Up we go! After all that drama, SPX is flat on the year.

Last week, we saw bullish continuation on our daily charts from the March Lows. The Tuesday dip was the one to buy and we will continue adding as we build and respect daily bullish structure. SPX is back to flat on the year, while Oil was down 14% on the week and is starting to build a nice daily bearish structure as well. There is tons of opportunity out there.

Indexes were up this week, driven mostly by the Tuesday night gains from a tentative "peace deal" on the Iran-Warfront. For the most part, markets are looking past where we currently are in the conflict - and starting to price in the coming peace via treaty or some other mechanism - but the end result is the same - we are going higher.

ALL the relevant DMAs have been recaptured at this point - and the market has returned to bullish structure.

SPX is now UNCH on the year, and we are structuring higher off the Quarterly chart, just as we have written about for weeks.

From here, SPX is going to 8500 and there is nothing anyone can do about it. The NDX will run to ~ 32k from here as well.

Oil dropped 13% on the week, and we are starting to build a nice daily bearish structure to lean against for shorts.

We would love for oil to retest the 102 level and drop lower from there for a perfect setup. An Oil spike of 6% like that would cause the indexes to drop initially - right into a buy zone - so keep your eyes peeled!

To add on to what we wrote last week about oil, these big oil spikes are almost 100% of the time a recession trigger.

Below is a chart of Brent showing the correlation between oil prices, and their subsequent recessions.

Oil spikes are the warning shot - falling rates are the confirmation of what is to come for the global economy.

Rates were modestly flat this week and should hover around here until we can get a clearer picture of the coming resolution in Iran.

1. Oil shocks produce Recessions

2. The Bond market knows this and will start to drop rates to price in coming economic weakness

3. Lower Rates & Oil will put a massive bid into risk assets - nobody asks WHY rates are dropping until we are at the market top.

The next move in rates is lower to backtest this area ~ 2.5%. That is basically a 50% reduction in interest rates that is needed just to clean up the quarterly chart. The fall in rates will be seen as massively bullish for the stock market - until the market tops out - which we are expecting when the 10yr hits ~ 2.5%.

Below is a snippet of what we wrote in last weeks newsletter.

What Comes Next?

In a weird way- this has all summed up to be an absolutely perfect cocktail for a final run into stock market highs. We are headed for a global recession:

• Oil Spikes never last, and always cause recessions- the war premium is already in the oil price - the NEXT move should be lower Oil Prices - just need to backtest some daily structure.

• Rates have the same structure as Oil - the war premium is already in the rates - and the next move is lower rates.

• Indexes back-tested and held their big quarterly levels - the NEXT move should be higher on TA alone - with added kick from rates and oil coming down.

Summary

The perverse thing about all this - is that indexes are poised to pop here on their TA quarterly structure alone. We're about to get the added "macro" kicker of lower oil and rates as everyone bids risk - and this is how the trap gets laid.

With SPX at 8500 or higher, and oil crashing down from $100 towards $30 - every macro person on earth will tell you how insanely bullish this all is. Everyone is happy when rates and oil fall, but nobody ever asks WHY...

Rates are going to fall with oil due to the continuing weakening global economy. Mechanically this will bid up global indexes - and force everyone to chase long at the top (just like they always do).

We will cover market tops when we get there - but for now we are very bullish on the indexes - so long as the LOY holds. There is MASSIVE opportunity laid out in front of us across almost all asset classes currently.

Here is the setup I am looking for heading into this week

• We want to see indexes backtest and respect some daily bullish structure that is forming .
  

• We want to see Oil continue to ease offering daily structure to short from - these should also serve as inflection points to add index longs.

  
  

Until next Week - We'll be watching