Author: Maggie Lake, The Market House

Translation: Deep Tide TechFlow

Deep Tide Introduction: Against the backdrop of the Federal Reserve's interest rate cut period and a massive global asset shock, the long-standing linkage logic between US stocks and US Treasuries is undergoing a profound reversal. In the past, rate cuts often benefited risk assets as rates declined, but in this cycle, falling rates have been accompanied by severe market sell-offs, while rising rates have strangely boosted risk sentiment.

Senior macro analyst Dale Pinkert, with decades of trading experience, has comprehensively reviewed the tipping logic of US stocks, US Treasuries, the dollar, Nvidia, and agricultural products, combining the latest trends. He bluntly states that the short-term strong recovery in the Nasdaq looks more like a bear market bounce and has set out the key support levels and game boundaries for investors to guard against a secondary plunge.

Dale candidly mentioned that, in the face of such intense market turbulence, he might have to seek a chiropractor next week to take care of his neck.

He pointed out that the Nasdaq index briefly hit a limit down last Thursday, and such a violent rebound in just 72 hours is extremely rare (this statement was made before Nvidia officially announced Jensen Huang's resignation).

Latest update: Jensen Huang has now officially announced his departure.

Dale emphasizes that every investor should honestly ask themselves: Have the stocks they hold really participated in this rebound? Have they recovered at least half of their decline over the past month?

If your positions have not kept pace with the index, and with perhaps only about 100 points of rebound space remaining above the S&P 500 index, if the market turns down again, these weak positions will face immense risks.

Because they lack rebound momentum and do not possess the same relative strength as the index, they are very likely to break below last week’s lows.

S&P 500: Heading towards the 7,000-point milestone?

Although there may still be a bit of upward momentum above the US stock market, Dale's current basic judgment is that the S&P 500 index is expected to make a push towards the 7,000-point level after clearing low liquidity.

“However, the S&P 500 is already one of the strongest-performing indices right now,” Dale commented. “This recovery in the Nasdaq looks more like a bear market bounce.”

“As for the Russell 2000 index, it is barely holding support, and it is hard to see it setting new highs. In the face of its rebound, I prefer to short it on rallies close to $290.”

Bond Market: A paradigm shift in stock-bond relations?

Regarding US Treasury yields, Dale still adheres to his previous judgment, expecting the 10-year US Treasury yield to rise to the range of 5.10% to 5.15%.

He believes that the stock-bond relationship has undergone a profound paradigm shift. Previously, when rates declined (as shown in the chart below), the broad stock market experienced heavy selling.

“The current logic has almost evolved into a situation where rising rates are actually favorable for the stock market,” Dale analyzed. “The underlying trading expectation is that inflation means economic expansion, and higher yields represent growth expectations.”

“You can clearly see that the two-year US Treasury yield is leading the field,” he pointed out. “From the pattern on the board, making new highs in yields seems almost certain.”

Looking at the performance of the US Treasury ETF (TLT), Dale noted that the current yield curve clearly displays characteristics of "a sharply tightening short end, with a relatively mild and gentle long end".

“When the 10-year US Treasury yield reaches 5.10% to 5.15%, it may become an excellent opportunity to buy TLT,” Dale stated. “If long-end rates peak at that point and start to fall back, this round of risk appetite rebound may also reach its endpoint.”

“It now appears that rising yields may actually stimulate the stock market. Bonds are turning into negatively correlated opposing assets to stocks, a situation that has not occurred in many years.”

Nvidia: “The most expensive scandal in global business history”

It should be noted that the chart below captures the market before the second extramarital scandal involving Jensen Huang was revealed yesterday, with the market generally expecting heavy selling pressure on the stock that day.

Dale bluntly stated that this is “the most expensive scandal in human history.”

However, even before this series of scandals escalated, Dale had already turned bearish on Nvidia. When Nvidia's stock price was previously at a high of $240, his technical target had already been lowered to $190.

He pointed out that there is a very critical support platform around $173 for Nvidia's shares. “The bulls must build a defense here and hold the line.” (The stock had already seen a significant decline in early trading that day.)

Dollar Trend: The strong pattern has not yet peaked

“Among today's macro assets, the dollar remains the unequivocal king,” Dale commented.

“There is no sign of a peak forming at the current levels. Although I currently do not have a long position in the dollar, I absolutely will not choose to short the dollar at this level.”

AMD: The bottoming process has not truly ended

Observing the daily Relative Strength Indicator (RSI), Dale believes that AMD has not yet determined its final market bottom.

“Technically, there is a strong possibility that the previous low red candle was just a local stage low, rather than a true historical bottom,” he analyzed. “I certainly would not blindly chase it higher here, and I suggest watching its strength when it retraces 50%.”

Agricultural Products: End of the correction and re-establishing long positions in agriculture

In the commodity sector, Dale believes the previous adjustment may have come to an end, and it could be an ideal window to re-establish positions in agricultural products.

Taking sugar as an example, he stated, “I believe it is completely possible to buy sugar at the current price, and do so with a tight stop loss for swing trading. A turning point is establishing an upward trend.”

Regarding wheat, he believes the market bottom has basically been established:

Soybean contracts saw a violent surge on Tuesday, directly hitting the limit-up restrictions:

Meanwhile, corn posted an extremely strong single-day performance after the crop report was released, with the bottom structure also becoming clear:

Precious Metals: Silver may outperform gold

In the precious metals sector, Dale believes that the bottoms for platinum and palladium have basically been established in this round.

Additionally, the gold-silver ratio may currently be forming a phase top area.

However, he also reminds that there may still be a second dip and position clearing in the precious metals sector. “I am closely watching to see who can lead the market first.”

“If silver continues to outperform gold in terms of resilience and buying strength, that will be a highly persuasive market signal for me, prompting me to favor going long on silver rather than gold.”