Will Inflation Derail This Stock Rally? with Dale Pinkert

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1:24And now to the top analysis of today's markets.

1:34Will inflation derail the stock rally? Hi, everyone. Welcome to the Real Vision Daily Briefing. With me today is Dale Pinkert, trading coach at TradeGate Hub. Hi, Dale. How are you? Good, Maggie. It seems like nothing could derail the stock market rally. You know, we had a dollar rally, which pressured oil. Oil's collapsing again today. Metals have been underperforming. The miners have. And stocks are parabolic. So you never know how far a rubber band could stretch. But, you know, I would say to people, even if they're bullish, not to get FOMO here and plan on being able to buy something cheaper in July or August.

2:17I still believe there's going to be a break into that time frame. Maybe it's going to be shallower than what I thought it could be. But I would not be chasing anything here. I don't know where you want to start, but I still think we have an ongoing banking crisis. OK, there's a lot there. Yeah, there's a lot there. So let's let's kind of move through and break down what your thinking is on it. So you're right. I mean, stocks have been I think people would argue surprisingly strong, even though even for the people who felt like, you know, there was there was some legs here. I mean, we just see every day.

2:54Interestingly, they're doing it as well, heading into a big inflation number tomorrow, a Fed meeting. It seems like the odds are now that the Fed will skip. That's the new vocab, right? Not pause, but skip a rate hike this week. But there is a lot of risk. I mean, that inflation number has roiled the markets before. So it does seem interesting that it's so strong heading into it. Why do you think this is happening? Well, last time I was on, I said we could see 4 ,300. Yes, you did. But now we're like 4 ,340. And if you want to pull up the S &P chart, it'll give a visual of where it's at. It's in a rising wedge from the March low.

3:34And then if you connect the last couple highs, we're coming in right here. Threatening a throwover. I know some guys that are talking about possibly 4 ,400. I think that what's been behind it is people have been wrong-footed. Too many bears like myself, prematurely short at 4 ,200. So I think that's a big part of it. I also think a big part of it is what's happening in rates. And it really started with the claims number last week. You saw rates come down pretty dramatically. They sold the dollar off and the market started to rocket. Again, smelling lower yields coming. And I'm not so sure if lower yields and a pause is really as bullish as the market is thinking.

4:26The narrative may change to why is the Fed pausing? And I think the reason the Fed is pausing is because, like I said before, we still have an ongoing banking crisis. And that it seems like everyone's forgotten about that. So we have actually seen banks, stocks, some of them start to rebound, at least at least off the lows. Is that too complacent? Do you think there's more to unfold here? Because it seems like the sentiment is, OK, it's over. Well, if you bring up the XLF, and these are supposedly the beneficiaries of the collapse of regionals, because everyone's moving their cash from regionals to the big guys.

5:11And if you look at this chart, just imagine S &Ps are new highs, what the Qs have done, what semis have done. This chart isn't that much different than the regional chart. The only difference would be the magnitude of the drop. But I still see another low coming in the regionals. There are two drives. I'm looking for another flush in the regionals. And the big guys don't look that good to me either. They'll sell off in sympathy or maybe with their own problems. I still think you have to avoid the banks or be short. So that may be a catalyst for why the Fed is considering pausing. Yeah, because, I mean, you know, if they were to continue the hike, we know the issues out there.

6:00Do you think that the big so there is sort of a narrative that there are going to be more bank failures, but they're kind of going to be intermittent down the food chain. Most of the larger regionals will be OK, although it could pressure them. And then the big money centers are just the winners out of this. They're just going to continue to sort of gobble up deposits. It sounds like you're a little bit more - It's not being reflected in stock prices. It's a big bonanza for them. We'd be above the 200-day moving average instead of underneath it. So that's a concerning sign for you, that there's cracks underneath the system.

6:45Yeah, and I think that what would help definitely, and another reason the Fed's pausing, is all these guys, including the big players, are long duration plays. So if we could generate a bond rally, it gives them somewhat of an escape hatch to make a better deal if they do have to. And I believe Yellen calls it she's expecting more consolidation in the banking industry. And to me, that's code word for failures. Consolidation. So it's interesting that you bring this up because it's kind of hard to find anyone talking about concerns. But we had a chat with Sri Kumar last week for the extended daily briefing.

7:33And in the second half, we dove into a little bit of the things he's concerned about. And he is bracing for trouble ahead. He's also concerned. Let's have a listen to a clip from that. I do not. I have said several months in a row that 4 % is roughly the ceiling. We went to about 4.25 in actuality, and then we backed off about one percentage point. We are now in the neighborhood of 3.7 to 3.8. I still believe that 4 % is roughly the ceiling. And why do I think that? despite my pessimism on inflation, because I think the recession is coming. Aggregate demand is going to be destroyed. And if there is one more credit event and the Treasury sucks up a trillion dollars worth of liquidity from the markets, that is, if anything, disinflationary.

8:26It's not inflationary. And that means there is going to be more money going to the safe haven of U.S. Treasuries. So I anticipate that after having remained high now, fixed income, long dated treasuries are still the place to be hiding in when the Armageddon happens sometime in the next six months. So interesting. So clearly he's concerned. Again, remember the time frame I think that you're both talking about, but we'll get to that in a second. It's not right now. This is a little bit further down the line. But he's concerned sort of in the second half as we kind of turn the corner into the fall.

9:08He is concerned about a recession, a deep recession, and he's concerned about something else happening. That would be sort of a shock to the system. That entire conversation, by the way, is on the platform. So if you're not a member yet, you can scan the QR code and join our community. Dale, it sounds like in many ways you have a similar view. maybe you and Shree's share concerns. Yes and I believe that yields are going to drop okay and I brought a couple of charts to tell the viewers why and the first is a four-hour chart of the 10-year yield. Okay so if you see that blue line at 360 and look left you'll see what an important level it was it broke out and got to the 390 level as expected.

9:58And then when we were on at the end of the month, we pulled back to that 360 level and held. And we're heading up to a major resistance at 390. But if you put up the weekly chart and take a look at what we're, I just wanted to say your first indication that yields are going to drop are going to be prints under 360. 330 is the big level. And if you look at this chart, Edwards and McGee, technical analysis of stock trends, would call this a descending triangle. Descending meaning that it's a reversal formation, a topping formation. And classically, they wouldn't get short until we took out 330. But should we do that, I could see the 10-year at 280, under 3%, maybe lower.

10:52and it's really easy to know where you're long. If we close over 390 because of some surprise and everything can happen, Fed could hike. Could be a bad number tomorrow. I don't know. But what's important to know are levels and how the market reacts to these levels. 360 has proven to me that it's an important level to hold. If it takes it out, we're headed to 330, which increases the probability of a breakdown under 330. And I think the catalyst for this is going to be, I think the market likes it now, but I think the catalyst could be risk off from somewhere, okay, and risk off. You know, a lot of people would, and I could understand, would see this as jet fuel for the market that's already stretched pretty good, like a rubber band.

11:48I think it could be about economic weakness and again, more problems with banks. And you know what? The European banks have as much on the line and they're probably in worse shape than ours. And Credit Suisse is not the only problem in Europe. So I'm talking about a global banking problem. China that we'll never know about. Europe that they finance bonds where I talked to a guy today, they're paying a fee because they bought negative interest rate bonds. And to hold their losing position, they have to pay to hold it because they had to pay because rates were negative to own that paper. That's brutal.

12:36Yeah. So I think in the bond market, if we start trading, I use TLT as a proxy. I didn't bring a chart. But back over 104 is going to be a pretty good sign that a turn is happening with confirmation over 109. And I can't think of anything that would, it could be inflation numbers, but I think part of it's going to be risk off on this move down in rates. Hey, everyone, we're going to take a quick break right now to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing. Have you ever wanted to trade Bitcoin but haven't dared try?

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14:15Yeah. I mean, that's always the worry, right? When you get that kind of move, you don't know ahead of time necessarily where it comes from. And we're still in a very fraught geopolitical situation. I mean, there are a lot of things that you can worry about. Interesting question from John, because it's right along what we're talking about. Dale, I noticed that long-term treasury, TLT, has retraced back to the breakout from 2008. Is this crazy to think of this as a leading indicator for equities? Three years ago, nobody thought TLT under 100 was possible. Okay, it could be. You know, but TLT right now, I think, is a buy over 104 and then an add over 109, 110 for a move to minimum 120.

15:05So, yeah, I think we're going to look at history down the road and look at this period as we were just whistling past the graveyard. There are a lot of melt-up people right now that are enjoying it. You know, you're seeing magazine covers. This bull market has legs. I believe that was Barron's. And the bear market is over, officially declared. They could be right. I want to stress, if you want to get long, even if this is a continuation or a new bull market, pick your spots and a 10 % correction from these levels would only take it back to 3 ,800. It wouldn't be the end of the world. But I would not be chasing this.

15:53And part of my rationale is I still like the dollar. Even though yields are going to drop, I would use good inflation news if they sell off the dollar on either the inflation news or the Fed pause. I'd use that to short euro over 108 to 109, wrong over 110. I started selling British pounds today. They were almost at their previous high. And I think that I would also sell gold if it rallied back to about the 1980 level, 1980 level, against a close over 2000. and the miners have acted lousy. I don't think gold's ready. And I still believe that the dollar is going to squeeze. And if I'm right about the dollar and I'm right about bonds, that's a risk-off combination to me.

16:52Okay, so the market ignored the first bounce in the dollar, but I don't think the market's going to ignore the dollar getting back above$105 and maybe heading to$108 or$110. with the bonds going with them. That's so interesting because so many people are... Barish. Yeah, and anticipating and thought maybe just some liquidity things around the debt ceiling debacles, what was sort of supporting the dollar. But once that was over, we were going to see that just that long expected decline in the dollar. So you have a bit of a contrarian view there. Well, so far, the pullbacks have been pretty shallow.

17:33So, you know, I thought that we might have a chance to buy the Dixie around$1.02 or close to$1.02. And I'm not so sure we're going to get that deep. So if anyone looks at the euro, it's having a hard time recovering. I mean, I want to short it, and it won't even give me a print over$1.08 yet. So, you know, I look at the way the euro's trading, and it's not bullish price action to me. So Robert is asking, is parity still an option for euro? Yes. 101 and maybe even under parity. There are different fib levels on it. I think 101 is a 61.8 level. So yeah, that's close enough to parity for government work.

18:22Wow. So this is all driven, you think, by people looking for safety, risk off looking to sort of hide in safe instruments and go with the strength of the dollar. Is that what you think is all connected? It could be because people want to buy bonds. You don't buy treasuries in euros or pounds. You can buy gilts and boons. But if the bond market is going to rally, I think European bond markets will rally too. If I'm right about rates dropping here, they'll drop overseas too. And I'm still worried about Ukraine. I'm still worried about the escalation. And as I said last time, there is some comfort being an ocean away from a land war.

19:11Yeah. Yeah, absolutely. And, you know, it's hard to imagine. I mean, it's, you know, we do still see it in the headlines, but you could go for days with people talking about the market and not really bring up Ukraine. And it's still a very active war. And China, you know, we just passed another trade deal with Taiwan. As I've said on other programs, we keep poking the tiger in the eye. it's almost like we're trying to provoke something and I'm concerned about that as well especially since China is kind of fragile economically and that's when nationalistic leaders distract their population with things like wars.

19:59Yeah sadly that that that history has shown that tends to be the case. Trillion X asking with everyone having given up on China isn't it time for a technical rebound? Sure, it'll be a technical rebound in China. But why buy the weakness? Okay, the weakness has been the Shanghai over the last month. So maybe it's time to buy once other global bourses cave or correct and you start seeing China hold up better, buddy. What are you thinking about when it comes to dollar yen? Again, another triangle in the yen And it's very tightly correlated with rates Which is kind of a conflict Because I think there's going to be one more shot up in US dollar yen Towards 141, 142 And then I'm looking for the yen to start heading down in a fairly big way So, if I'm right about yields, the yen won't stay disconnected to it for long.

21:08Lower yields means a lower U.S. dollar yen. So, Ralph asking, what's your opinion on the Nikkei? Blow-off top. I don't know how you trade it. I'll let you do it with your money. But it's parabolic. And if you were fortunate enough to still be long Japanese stocks, I'd be hitting the sell button in here. I don't think it's going to be immune if we have recession fears here in the U.S. If we sneeze, Japan will catch pneumonia. We're going to take another quick break to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

21:55And it's funny because we had Larry Summers just out saying that the U.S. economy is still strong, a lot stronger than people had thought. I think he remains concerned about inflation. He thinks it's going to cool the economy from where it was, but by no means is it going to be cool enough for the Fed to be able to think they're done. And yet we have recession concerns. It's a very divided opinion. Well, you know what? After this break to 280 and 10-year yields, I see 5%. So this is like an event. I don't think it's going to establish a long-term trend. Like I said, this is going to be a window for all the Fed's buddies at the banks to lighten up on their duration trade.

22:46Okay. And it's not going to be long lasting. I'm not looking for a new bull market in bonds or a new bull market in notes. I'm looking for like a swing, two, three month trade with rates dropping. And in that time period, I think we have a two month, three month market event in that time zone. The only difference I have with Sheree is everyone thinks it's later. And we always want to think that things that are not good are going to come later down the line. So we have all this time to prepare for it. And it's better to be early for events like that than think that you're going to be on time once we're in the middle of it.

23:37Yeah, absolutely. I think, Ralph, I think that answered your question. Ralph was asking, when do you think TLT will make a move past 104, 109? It could be this week. I think this week is an inflection week. Also, we have the end of spring coming. And it's a GAN thing to look for reversals into the change of seasons. And the solstice is, what, about nine days away. So we're in that window to look for reversals from what's going on. the spring is over and the summer is beginning. It is. And it's tricky because, you know, the market thins. What a great time for a bear rate. Yeah, exactly. Exactly.

24:22It would be dangerous. Oliver has a fantastic question. When you trade, do you try to predict a turn in the market or do you wait for the turn to sell? um it's a bad habit but uh i'm always early but i've learned that you know i don't go all in or all out on any position i'll put out feelers to pay attention to the market knowing that it's probably going to move against me a certain amount of percentage points and if i still believe in the trade then i'm looking to add and there's nothing wrong with just waiting for confirmation. In fact, you'll probably have less duress in your career if you do that.

25:06It's just in my nature to try and top and bottom pick things with my three drive formations and RSI divergences and at times it hurts. But it's my style and you're not going to change me now. Nor would we want to, Dale. But your point about sizing is really important. Yeah, probe markets. Yeah, you want to live to fight another dad. Do the same thing on your outs. You know, I can't tell you how many times I've made the tough money and then the big moves happen and I'm not there. So to overcome that, I don't sell everything all at once. And in fact, here's a great tip that was given to me because I had shared this problem with a trader.

25:57And he said, Dale, you know what? Next time you're thinking about liquidating a position, ask yourself if you would reverse the position right there. And if the answer is no, walk away. Because if you're long and you're selling, but you don't think it's a good place to get short, why should you sell? Right? And vice versa on a short. So ask yourself that question. And test it out if you don't have, you know, real automatic type of trading system, if you're a discretionary trader. And even at that time, don't sell it all, sell a piece. Fantastic advice. George is asking for clarification. Dale, did you say 5 % on long treasury?

26:48Yeah. The 5 % on the 10-year yield into the end of the year. Yeah, after it goes down, you see it headed back up. Right, because of what you just mentioned, that inflation is still sticky. You know, we're not always going to be so fortunate about oil prices. The Saudis must be pulling their hair out. They've been trying to support the market with cuts. You know, isn't that a signal? What's happening in energy? Isn't that another, you know, what's wrong with the global economy when supply is being cut. We have a big reopening in China. AAA says there'll never be more drivers on the road. You can't get a seat on an airplane.

27:35And the price of oil keeps breaking. Tell me what that's about. Is it a glut or is it demand destruction? Which is the second is my choice. Yeah, we've had some interesting, we're gonna touch on this coming up in some of our extended. we've had some interesting research notes crossing our desk and our eyes. And a lot of people kind of zeroing in on this idea that, you know, it's kind of a tale of two economies. We mentioned that in a question last week. And there are a wide swath of people who are struggling and facing recession. And then there are the haves who are vacationing and taking trips and booking restaurants.

28:20And you You can be easily, you know, if you look at that behavior, it would lead you to believe that things are really strong. But are they? You know, which part, if it's true that we have to do a time? Well, Larry Summers ought to move to the city and see how real people live. All the elites that think they have a viewpoint of what's happening in America based on unemployment numbers need to do some gumshoe work. Yeah. And take a ride through the country and see how the country really is doing. Yeah, absolutely. We just saw it. We see them all the time. Another story about - They're in their towers saying, let them eat cake.

28:58Yeah. Yeah. Well, that's a problem across the board. But it's very interesting if you think about that, because then it's what kind of data are you collecting? What are you paying attention to? Services versus, you know, it's very interesting. So we're at this point, but we've had many people say, Dale, it's very hard right now. It's a very hard macro environment to try to make sense out of. By the way, oil, you mentioned oil. Oil down 4 % today,$67 a barrel. What a robust economy we have, Mr. Summers. Yeah, yeah. It is really shocking to see that. There was a headline earlier today I saw about how oil traders are daring to push back on Saudi.

29:41It's a very interesting conversation. So let me get this one in.