By Todd Stankiewicz CMT, CFP, ChFC
1/Â Will Rising Commodities Derail the FED?
2/ The Line is the Sand for the S&P 500
3/ Don’t Sleep on Duration
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1/
Will Rising Commodities Derail the FED?
Inflation remains the market’s primary focus, with investors clinging to hopes of continued rate cuts from the Federal Reserve. However, the Bloomberg Commodity Index is starting to tell a different story. While CPI has been increasing at a slower rate year-over-year, commodity prices appear to be breaking out of a two-year downtrend, a divergence that could signal renewed inflation risks. If this trend holds, it may dash hopes for rate cuts in 2025 and trigger heightened market volatility.
The market’s reliance on low rates highlights a broader behavioral issue: the addiction to easy monetary policy. As commodity prices inch higher, it’s a reminder that inflation isn’t just about the Fed’s moves, it’s also about supply and demand dynamics in key markets like energy and metals. Investors would be wise to monitor these trends closely and focus on building resilience in their portfolios, as any resurgence in inflation could upend the current narrative and challenge assumptions about what lies ahead.
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The Line is the Sand for the S&P 500
AI Shake-Up Sends Shockwaves Through Broader Indices
Big news in the AI space is rattling markets today, putting the S&P 500 at a critical juncture. The index is testing its middle Bollinger Band at 5958.45, a level it needs to hold to avoid more downside. If it doesn’t, we could see a move toward the lower band at 5785.94, a roughly 3.7% drop from Monday’s intraday high of 6011.
This kind of action isn’t unfamiliar. Over the past six months, similar pullbacks have played out. When the lower band was tested in September and October, it held, but in July and December, it gave way. What happens this time could offer important clues about where the market is headed next.
As always, staying focused on these levels will be key.
3/
Don’t Sleep on Duration
Treasuries Rally as AI Concerns Shift Market Dynamics
Treasuries are rallying today as concerns grow over a potential shake-up in AI growth projections. The Vanguard Extended Duration Treasury ETF (EDV), one of the longest-duration ETFs out there, has been quietly stabilizing after hitting its lows. Recently, it held the October 2023 lows and is now finding support near the lower Bollinger Band.
What really stands out here is the RSI, it’s making higher lows with each test of support. This bullish divergence suggests there could be an unexpected move higher in long-duration treasuries, potentially breaking a four-year downtrend.
The level to watch is the middle Bollinger Band at 74.85. If EDV can break above that, it opens the door for a push toward the upper band. It’s a good reminder not to write off any asset, even in markets as beaten down as treasuries.
Disclaimer: Advisory Services offered through Sykon Capital, LLC, a registered investment advisor with the U.S. Securities and Exchange Commission. This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor. The information contained in this presentation has been compiled from third party sources and is believed to be reliable as of the date of this report. Past performance is not indicative of future returns and diversification neither assures a profit nor guarantees against loss in a declining market. Investments involve risk and are not guaranteed.
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Originally published 28th January 2025
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