Special Heads-Up: CPI is out on Tuesday and PPI on Thursday, either or both could generate volatility to bond and stock markets next week. Stocks & Interest Rates I posted this 10 Year Yield chart late Friday, illustrating how rising interest rates coincided with a falling S&P 500 through much of last year. This trend takes on added significance this weekend, not only because of the inflation reports due out next week, but because the US 10 Year Treasury Yield closed at its highs on Friday and thus generated a fresh Buy Signal (Blue UP Arrows) in its Intermediate Term Trend Model. A continuation of rising rates should pull the legs out from under the SPX/SPY. We have a standing order to buy the SPY Mar 17 $390P anytime SPY closes below 400.00. Based on this chart, that should happen in a matter of days, if not hours. 10 Year Yield Model & SPY Four of the previous five Buy Signals for Interest Rates (10 Year Treasuries) resulted in substantial S&P declines over the following 30-60 days. With Friday's Buy Signal the forecast is now for a lower SPY at least into March-April. A weak stock market on Monday should trigger our SPY trade. Watch Bitcoin Sunday night (or Super Bowl - your choice) for a heads-up into Monday's Open. SPY - Sell Signal pending EEM - New Sell Signal This EEM trading model has been generating reliable entries to the short side all of 2022. Options are cheap and a 10% move down from current levels would take EEM to 36 and the March 17 $40P to 4 or better. EEM Sell Signal Option: Mar 17 $40P (0.77-0.84) Target EEM <36; $40P > 4.00 Risk: 50% Trailing Stop Time & Price Cycles: Latter Half of February over 72 years This Day of the Month Cycle for February coincides with everything: Elliott Wave patterns, Trend Models flipping Short, bad news on the inflation front, higher interest rates and finally, a spike in volatility. Speaking of which VIX did close above 20.00 on Friday and was well above 21.00 earlier in the day. Any breakout above Friday's high print of 21.94 is raging buy signal, whenever it occurs. For next week the vehicle of choice is the VIX Mar 22nd $25C. VIX - Buy on anytime breakout above 21.95
