Stocks moved lower as Nvidia (NASDAQ:NVDA) faced rising implied volatility and a bearish technical setup.
More importantly, the S&P 500 broke the rising wedge pattern we’ve been monitoring for some time. As of now, we’re seeing the effects of last week’s bearish engulfing pattern.
Remember, I mentioned last week that, based on past behavior, it can sometimes take a week for these patterns to play out.
The 2B top pattern failed earlier this week. Currently, the rising wedge is broken, the engulfing pattern is playing out, and the bump-and-run pattern is still in play. 
The setup at this point is pretty interesting, not just from the technical mentions above but also from a cycle standpoint, as the 80-day cycle is now peaking.
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Additionally, the 180-week cycle is peaking, which suggests we could be in for a major shift in the market compared to what we’ve experienced over the past two years.
This cycle has produced powerful signals in the past, including the 2000 and 2007 tops and even the 2009 low. So, we will continue to watch how these two cycles develop.
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10-Year Eyes 4.7%
10-year rates continued to move higher yesterday, reaching 4.25%. The next level of resistance comes around 4.33%. Things will get interesting if the 10-year manages to push through because after that, it could run to around 4.7%.
Well, so much for the USD/JPY strengthening; instead, it has continued to weaken against the dollar. Certainly not what I was expecting.
But then again, the in the 10-yr rate move has happened faster than I anticipated. The USD/JPY just continues to trade in line with the 10-year. So, if the 10-year continues higher, then the USD/JPY is likely to continue weakening.
10-Year Decouples From Crude Oil
Oil prices continue to struggle, but the 10-year is detaching from oil. The reason for this, I think, is that nominal GDP continues to be strong. However, based on some of the anecdotal data and observations, some of the inflationary pressure may come from wage growth, labor costs, and higher services costs.
The Philly Fed services prices paid and received significantly increased in October, while the Richmond Fed average wages rose sharply in October. This type of inflation is not the same as what we’ve been accustomed to. So, the 10-year may continue to decouple from oil.
Finally, the Atlanta Fed GDPNow model suggests a real 3Q growth rate of 3.4%. More importantly, the model indicates that PCE for the quarter is running at 3.6%, which means inflation has reaccelerated since the second-quarter slowdown.
Additionally, it implies that nominal GDP growth is currently around 7%. So much for the recession.