The key part of the Treasury yield curve inverted further as investors anticipated the U.S. economy will stall next year and lead the Federal Reserve to back off its aggressive hiking of interest rates. The market is pricing in a recession next year as the yield spread between two- and 10-year Treasuries deepened to minus 70 basis points, an inverted level last reached in 2000 that is clear a harbinger of an impending recession. Fed will tighten monetary policy further even though soft consumer and producer price pressures suggested inflation has peaked and would allow rate hikes to ease. This is a negative signal for the stock market.
Trading recommendation: sell 4000 and take profit 3900.
Based on historical cycles peaks in the dollar are typically associated with a trough in measures of U.S. and global growth, and an easing Federal Reserve. This is an important factor for the precious metals market because gold and the US dollar have a strong correlation. Investors anxious to determine when the dollar should hit its peak may have to wait a few more quarters. The dollar has drawn support from steady U.S. economic activity and still elevated inflation despite a slew of big rate hikes. The Fed has acknowledged that the concept of a "restrictive" policy rate is a moving target and estimates of the cyclical neutral rate have increased.
Trading recommendation: range 1720 - 1800.
The US crude market’s structure is signaling oversupply for the first time in almost a year, the latest indicator of the scale of the dramatic slump in the nearest section of the oil futures market. The front-month spread, which reflects short-term supply-demand balances, traded in contango the industry term for the bearish market structure ahead of the December contract’s expiry. One other subsequent spread also flipped to contango. The rest remain in the opposite bullish structure, known as backwardation, indicating the move could yet be a short-term one. WTI prompt spread flips into contango for the first time in a year.
Trading recommendation: sell 80.50 and take profit 78.40