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- Coiled Spring Capital Macro Report Nov 13, 2022
Last week proved difficult for bearish market participants who continue to ignore simple market structure and cyclical tailwinds. While tactically trading the Midterm election event and the CPI print, was not something we were advocating due their binary nature, we were most certainly not bearish, and sometimes not being on the wrong side of the market is just as much of a victory.
We advised readers of our analysis that performance post the mid-terms into a 3rd Year Presidential cycle, is quite bullish.
We have many interactions with people who consistently tell us why our analysis is wrong, and why it's different this time, but time and time again, our work leads us to the right conclusions. Opinions and narratives are fine, as we have them ourselves, but without confirmation in the underlying market expressions, we are hard pressed to take any of these people seriously. Put simply, they do not do the work outside of extrapolating a few headlines and examining an SPX chart. One dimensional analysis is just not what we do.
Since early October, we have been speculating that rates will peak over the ensuing month. We have seen very little written or talked about this even being a possibility. In fact, most were calling for much higher rates. Rates topping would be met with a floor in the stock market, which is what we specifically wrote in our conclusion page of our weekend report on Oct 9th.
There is a plethora of reasons why we felt comfortable making this bold call, but the #1 reason was DeMark multi-timeframe signal alignment. This coupled with other fundamental views and technical divergences, led us to conclude a top in rates would occur. Fast forward 1 month and rates seemingly topped for the intermediate term.
We even proposed this potential publicly on Twitter on Oct 31st, offering clues as to our position.
2 weeks later and the 10-year filled out our right shoulder and broke convincingly.
Was this the ultimate top in rates? We think likely, but if inflation persists at a sustained higher level over the next year, higher rates vs what's currently priced in, can certainly happen. But, for the short to intermediate term, we think this breakdown has meaning and shouldn't be understated.
Heading into this week, we specifically highlighted the importance of the 3720-3750 SPX region. This level was our line in the sand for bullish or bearish tactical posture. It's safe to say this region has meaning and likely would be supported on any retracement.
Post the previous Friday Doji candle close, the market never looked back and now into an important Fib retracement level.
Here was our view of the Nasdaq heading into this week, highlighting the importance of the 10565 level.
After struggling to hold that level most of the week, we gapped above it post CPI. This also will prove to be an important battleground in the months ahead.
Our analysis continues to be comprehensive, contrarian and multi-dimensional. If you are trading the market, being on the right side is imperative to outperformance. Our analysis gives our readers the confidence to execute and outperform. Here is a recent message from one of our members:
This client is up +38%. Many congratulations to him!
