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Yield Curve Inversion Negatively Affecting Stocks

Posted 06/04/2019 9:39AM CT | Greg Perlin

The S&P has bounced this morning which continued a close yesterday about twenty points off their low.   The main driver yesterday was a Fed official came out and stated that we might have to lower rates, which immediately put pressure on the dollar, yields and rallied stocks. The big negative for stocks going forward is the continued yield inversion where the 3-month bill is higher than the 10-year note, which if history repeats itself, is a very good predictor of a recession occurring in the next 8-12 months.    

Looking forward to important economic news this week is the all-important employment number which comes out on Friday at 8:30 central time. The street is looking for 185K new jobs added vs last month 263K reading.  Technically speaking, the number traders want to pay attention to is the 200-day moving average, which comes in 2784. Traders should look to sell rallies as we are in correction territory.   Additionally, I see some minor support at 2728.75 which was yesterday’s low.   As always, these markets are very fluid, and traders should always watch for fed officials that come on the tape and talk about rates.

E-Mini S&P 500 Jun ’19 Daily Chart

E-Mini S&P 500 Jun '19 Daily Chart

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Greg Perlin

Senior Market Strategist
Greg is a former Chicago Board of Trade member. He was an independent floor trader, pit broker and floor broker with Cantor Fitzgerald. Some of his clients included traders from Morgan Stanley and Lehman Brothers. He also acted in the capacity of desk manager for the morning trade desk. Greg was part of the elite Lind Plus Division for 10 years before joining RJO Futures in 2011.
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