Wednesday's Market Minute: Bears Are Back In Control

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Coming into this week, I framed the market as being in a race between two potential technical breakouts: a breakout in the U.S. dollar and the 10-year yield, or a breakout in Apple and bitcoin.

All four of these charts are sitting in very interesting areas, and in my opinion reflect competing forces. Apple is once again trying to lead big tech back to records and a bull market, and bitcoin has been flirting with resistance for more than a week. The longer-term momentum favored the 10-year yield and the U.S. dollar to win that race, and it looks like we got our answer yesterday.

The Treasury yield is, of course, in part a reflection of tightening Fed policy, but it mostly tells us that, despite curve flattening, we are still in an economic recovery. The dollar is an important corollary to this, but one that is more attached to the notion of monetary and fiscal tightening. That's why the greenback has been so crucial in my analysis for eight months: when it breaks out after periods of consolidation, it has been clear indication of economic tightening and the liquidity drain the Fed is trying to achieve by hiking rates.

At this juncture, a breakout in the dollar likely signals a screeching halt to the strength in speculative growth assets that have been trying to reverse a months-long downtrend (in some cases, like the ARKK fund, a year-long bear market). Cloud stocks, green energy companies, and pretty much every style of high-growth futuristic business got slammed yesterday, and the charts failed right where a bear would expect within their long-term downtrends.

It's possible a big consumer cash-flow giant like Apple can sidestep the valuation compression happening in more speculative areas of the market as the Fed gets serious, but a recent breakdown in chipmakers is not encouraging. In other words, it's looking like bears are still very much in control.

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This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.