Equity futures are up slightly to start this new week. Stocks appear slightly overbought in the short-term, and are showing some signs of waning upside momentum, but in no way does the uptrend appear under threat at this time.
One of the most notable observations this morning is the breakout of USD/JPY to its highest level since May 2019. This currency pair is known to be an excellent barometer for "Risk On" vs. "Risk Off" in the market, and a new multi-month high is definitely not a bearish indicator.
The U.S. Dollar looks strong, and appears poised to rally off the back of continued capital flows coming in from foreign countries that are not doing as well economically as the United States. It definitely helps that the U.S. is one of the few countries in the world with a monetary policy in positive territory, while many other developed nations are still using "NIRP" or "ZIRP."
Crude Oil was very volatile last week, hitting a multi-month high, only to see all of its gains of the prior 4 weeks erased in just 3 trading sessions. It appears that the market doesn't believe the conflict with Iran will escalate into anything serious--at least for now. Coupled with a strong dollar, crude oil could face some headwinds here going forward. Its next low will be very important in determining the overall direction of this market in the next couple months.
One last thing to keep an eye on is interest rates. They've been trading in a tight range the last couple months, but once this consolidation is finally resolved, a dramatic move in one direction or the other is probably in store. We won't get into too much detail about our thoughts on the Repo Crisis in the Weekly Memorandum, as that service is reserved for subscribers to our reports.