Volatility at an Inflection Point

John Netto -- Chief Investment Strategist -- NetBlack Capital -- Monday, December 08, 6:46 PM PT -- In my preview for the week, I wanted to focus on four vehicles that would help determine overall market sentiment and how I would be proceeding with my trading strategy based on those dynamics. The four were gold, 30 year bonds/NOB Spread, USDJPY, and the relationship between the large cap and small cap indexes (S & P 500 futures vs. Mini Russell Futures). While we noted the underpinnings for a rally were in place this week, there were some indications the gains put on by the market today are tenuous at best. The first being a robust move in treasuries following early morning weakness served as the first indicator this rally was more a dynamic of technical buying than any meaningful asset allocation shift into equities. Despite the promising start with risk aversion abating, the USDJPY came under pressure late in the day in lockstep with the pullback in the equity markets as overnight highs near 9385 were never meaningfully challenged again during the US Equity day session. Leading me to confidently speculate an overhang of supply is ready, willing, and able to offer into these rallies and start choking the bids again, thereby sending this cross lower... . . . (to read the remainder of this article, please log in below.)