1. Moving the market

The major indexes began the session on a downward trend for the third consecutive day, as bond yields surged, with the 10-year yield surpassing the 4.25% mark. By the end of the day, the S&P 500 had suffered its steepest decline in seven weeks.

While some traders attribute rising yields to a robust economy, I believe that concerns over the deficit play a more significant role, especially given the current economic instability.

My perspective was reinforced today when it was revealed that US Existing Home Sales fell to their lowest level since 2010, dropping 1% month-over-month (MoM) against expectations of a 0.5% MoM increase—a substantial miss. Although August’s 2.5% MoM decline was revised to a 2% MoM drop, sales for the year were still down 3.5%.

Despite short-term weakness and volatility being common in any bull market, the recent pullbacks have remained within expected ranges, indicating that the long-term trend is still positive.

However, the current political and geopolitical climate sets up the possibility of a significant directional shift, even as we approach a typically strong seasonal period. Today’s 1% drop is still considered a moderate correction.

The MAG7 basket suffered, with tech giants Apple and Nvidia losing 2.16% and 2.81%, respectively. The most shorted stocks continued to lose upward momentum. The dollar ended the session stronger, approaching its July highs.

Gold could not withstand the strength of the dollar and rising yields, relinquishing the gains of the past three days. Similarly, Bitcoin fell below $66,000, and crude oil slipped but managed to hold its $71 price level.

If today is any indication, volatility will continue to be with us throughout the election period.

1. Moving the market

This morning, rising bond yields were at the forefront of traders’ minds, dampening the positive sentiment that had characterized the start of the earnings season.

The 10-year Treasury yield briefly climbed above 4.22%, a level not seen in three months. Although it retreated as the session progressed, the major indexes slipped and struggled to deal with this overhead resistance.

The surge in yields was partly driven by comments from the Fed’s Kashkari, who suggested that the Central Bank might adopt a more “modest” approach moving forward. Traders were puzzled by the surge in yields following the Fed’s 0.5% rate cut a month ago, as this was the opposite of what they had anticipated.

An improving economy contributed to the rise in yields, but there was also pessimism that the Fed might not be as aggressive with future rate cuts. Despite this, traders currently see an 89% chance of the Fed cutting rates by another 0.25% at their next meeting on November 7.

Ultimately, the markets fluctuated without clear direction, with the major indexes closing roughly unchanged. Traders’ attention was also focused on the upcoming election, with current bets indicating a one-sided outcome. However, as the saying goes, it’s never over till it’s over.

The MAG7 basket managed to eke out a gain, aided by bond yields flattening out towards the close. The dollar advanced moderately, while gold surged to set another record, with its GLD ETF rising by a solid 1.06% to close above $2,760. Silver also saw gains, but Bitcoin remained stagnant, finding support at the $67,000 level. Crude oil rallied, surpassing the $77 price point.

Interestingly, as gold prices continue to accelerate, global liquidity (M2) has diverged and moved in the opposite direction.

Will gold be able to rise to this challenge?

1. Moving the market

The major indexes began the session on a downward trend after scoring another positive week. With major corporate earnings on the horizon, future market gains will hinge on companies surpassing expectations as the earnings season intensifies.

Approximately 20% of S&P 500 companies, including prominent names like Coca-Cola, Tesla, and GE Aerospace, are set to release their earnings reports. So far, results have been mixed. Of the 14% of S&P 500 companies that have already reported, 79% have exceeded expectations, though the magnitude of these beats has not been particularly impressive.

Despite this, optimistic traders see potential for further gains. However, concerns remain about market overvaluation and the impact of ongoing geopolitical unrest, which could lead to increased volatility.

The Dow and the S&P 500 retreated, while the Nasdaq managed to close in positive territory. The release of the US Leading Economic Indicators, which fell to their lowest level since 2016, did not help market sentiment.

Gold and Bitcoin’s early rallies were erased as the bearish mood took hold. The most shorted stocks were hit hard as bond yields surged, causing a significant drop in prices. The 10-year Treasury yield rose by 11 basis points, closing just below 4.20%, which boosted the dollar to its highest level since August 1.

Gold reached a new record high early in the session but ended the day lower. Bitcoin followed a similar pattern, peaking at $69.5k before falling back to $67k. Crude oil reversed its previous losses and reclaimed the $70 level.

With the upcoming election just 10 trading sessions away, volatility is expected to increase, which can easily flip market sentiment.