Market Sentiment
SPX
As the stock market can show the sentiment of the market, currently we can see how the SPX is forming a bullish channel on the D1, and price is testing the 4090-is support level. The overall market appears to suspect a potential bullish continuation if the supports hold, with a possible move to the 4200 price level if the US inflation rate eases further this week.
BONDS
The US-10Y has also been on the rise as it correlates to falling bond prices and therefore supports the risk-on sentiment that is present in the market. Also, the US-10Y also makes a breakout of a triangle pattern after making a double bottom in early February, which also signals bullishness for the US dollar.
However, the bond yield curve of the US-10Y and US-03M is still inverted, which still gives investors a warning signal of a possible recession in the near future, and hence investors should remain cautious.
VIX
The VIX has also been dropping in the broader view and making a wave-like pattern to the downside, hovering over the 20 value after having briefly stayed below the 20 level, which usually shows a low level of fear in the markets (risk-on environment). A further move back below 20 can then further support the bullishness in high-risk assets. which can be determined after the US data on inflation comes out this week.
DXY
Looking at the dollar index, the DXY is still stuck in the bearish channel and testing the upper channel. While following the strong sell-off in November 2022, the sell-off gradually lost steam until it bounced off the 101.25 May 2022 support level, and bulls bought the dollar aggressively.Hence, price action-wise, it seems the dollar also has a bullish bias, which aligns with the rising US-10Y, but a bullish trend cannot be confirmed yet, and maybe the inflation and retail sales data can shed some light on the dollar’s direction.
Overall, I do see a possible short-term bullish sentiment in the markets; however, the upcoming US inflation rate and retail sales this week will play a role for traders and investors regarding the market sentiment and possible overall direction. If inflation continues to fall and retail sales rise, this could be a catalyst for the bullish sentiment to hold, while the opposite could shift market sentiment back to bearish.
P.S. My opinions are my own, and this forum is merely a knowledge base.Please do your own due diligence, as trading and investing carry a high risk of substantial loss.