Warning: Oil Falls But Yields Still Rise: A Stock Market Breaking Point

Hey folks, welcome to verifiedinvesting.com. My name is Gareth Soloway, Chief Market Strategist here. Now, in today's video, we've got to look at the markets here. They're continuing to break lower as yields are breaking out. And there's something different about this move that has me a little bit concerned. Now the S&P 500 is still above its neutral line, which keeps me bullish on the S&P, but it is concerning to see this one thing that is going on could predate a bigger sell-off in the markets. Before we get into that, folks, just a reminder right here on my channel, you can join Gareth's Top Squad. $10 a month, you get a live Q&A almost every single weekend, exclusive videos every week, epic discounts, swing trade alert charts, all of that for $10 a month. All right, so what's the concern here? The concern is that oil is falling sharply today and yields are still going up. Now, what we know is in the past, yields have been pushing up mostly because oil has been pushing up, but that's not the case today. And that speaks to a bigger concern that we're starting to see in the markets, and that's fear of debt and still a relatively strong economy, and the fact that the worry now is inflation is inbred in the system and not going away anytime soon. Let's take a look at the charts here. The S&P 500 is before you. We are near the lows of the day on this Tuesday, down about a third of a percent. Yesterday, the S&P dropped three quarters of a percent. Now, if we look at this on a technical basis, we're basically coming into short-term support. Short-term support, why? Because there's a gap fill right here. Fill of the gap would be right here. As a short-term investor, that's a level I will be watching very closely. Generally, when you have a gap like this, where you close one day right here, gap up here and push, you do check back to the gap fill. In addition, the S&P keeps me bullish because we are still above this white trend line, which is the beginning of the neutral zone. The neutral zone stretches down here on the S&P 500. Below here, that's very, very bearish. If we break below there, watch out below. My guess is we see a sharp, fast sell-off that could be as much as five to ten percent in a couple days. But again, as long as we hold above this level, which is around 7,575 on the S&P, the chart is saying to me, remain bullish. And remember, it's not about what I think or feel. In fact, overall, looking forward at all the issues that are in front of the U.S. here in the world, I'm honestly very, very bearish about the next few years. But shorter-term, the charts decide. The charts decide what's going to happen in the near-term. That's really the only way I have an edge in my prediction or probability statistics. Okay, so going back to the S&P, this is where we currently are, down about a third, just over a third of one percent. And the culprit today, like I said, is the 10-year yield. Look at the 10-year yield at 5.285 percent. It is now piercing the highest pivot from 2007. So again, this is the trend line that stretches back to 2007 and actually as far as 2006. If we get above this, we are going to 5.5 percent on the 10-year yield. All right, now again, we've had a pretty sharp move up. I'm watching like a hawk to see what happens here. I'm going to flip from the daily chart to the weekly chart to show you guys what I'm looking at. So if we zoom out, this is your high pivot from 2007. June of 2007, we went up to 5.28 percent and then we had this huge drawdown during the financial crisis and then the drawdown during COVID was right here before the big rebound. Now, does this concern me a little bit? This looks very much like maybe a cup and handle pattern. Yes, and that tells me kind of what I was telling you before, that longer term, I honestly think rates are going to go up. All right, I don't understand how they can't go up. If the U.S. is adding $2 trillion to $3 trillion in debt per year and is paying interest of $1 trillion a year, that is literally unsustainable and we are essentially almost at that bankruptcy point, if not already there for the U.S., borrowing money only because we are the United States and people were basically the best looking shambly house on the block. Right. And so if countries are going to buy debt from a country, they're going to look towards the strongest, which is still the U.S. doesn't mean we're solvent. I want to be clear on that, but it's still the nicest house on the block, essentially. So that's the level we're watching. Do we get rejected here? If we get rejected, it implies that the S&P would get that bullish move to the upside, possibly as high as 8000 on the S&P 500. Now, if we push through this level, that's troublesome. I think the market is looking at this as a key level of if we get above it, markets are going to really start to sell off. In addition, what I mentioned before, if you look at the WTI crude chart, this is very, very concerning. Crude oil today is down three percent. Now, again, three percent drop in crude oil when generally we see if crude oil is down, yields are down on the 10 year. Not happening today. In fact, they're going in opposite directions. And what we've seen for the last many, many months is that if oil's up, yields go up. If oil goes down, yields go down. But again, today it's diverging. And that could be an omen that the market is now looking past oil and saying, you know what? Even if oil goes down, the U.S. and the world has much bigger problems. And I would tend to agree with that. I think we all would. The question again is in the short term, what ends up happening? Now on oil, if we flip back here, guys, oil again, I think we're headed down to $88 a barrel. This lower parallel trend line, beautiful parallel right here. The question is, once we get there, do we just start to bounce right back up? And I think the answer is going to be very clear. If we break this level right here, it's going to have to be on a deal with Iran. If not, we're probably stuck in this upward sloping parallel channel. If we get a deal, it's going to go right below there and we're going to see a bigger breakdown, probably to $70 a barrel or even below. Now, we did get some economic news this morning. We got the JOLTS report, which is job openings. It was weaker than expected. And this is another very perplexing scenario. Consumer confidence weaker than expected reported this morning at 10 a.m. as well. And so you had two economic numbers that were weaker. And really what that tells us is that maybe, I mean, in theory, it would tell us, well, if the economy and job openings are starting to go down sharply, maybe you don't have to, maybe the Fed doesn't have to hike rates, which would imply rates should go down with oil today. Instead, they're going up. And that's another very concerning thing. So I'm going to remain, you know, talking about my positioning. I remain bullish on the markets and I generally have more longs in my portfolio with smart money stocks and ETFs members at Verified Investing where they see my live portfolio, exact shares, my entries, exits, alerts, all of that stuff. But the kicker is this. I'm generally gravitating towards high quality names like a Clorox. Now, Clorox has been beaten up. Nike's beaten up. And you could argue if Nike is really a high quality name, but it still pays a nice dividend and it's at multi almost decade lows. Right. And so those are the ones I'm gravitating towards because, again, I feel more safe knowing that those have been around and stood the test of time. So very interesting little market here. But going back to the oil chart again, I'm watching this. We should head in the next couple days down to eighty eight dollars a barrel. Once there, that's going to be the first big test on the 10 year yield right here. This is what I'm watching so closely. This level five point two eight percent. Do we break out above it? If if that happens, I wouldn't be surprised if the S&P starts to test this neutral zone down here and maybe even break towards the bearish zone. So we are at a pivotal level on the charts here. And I want to be clear on this is that we have more economic data coming this week. In fact, a massive amount. We're looking at the ADP private employment numbers tomorrow. That's going to be the first indicator at 815 a.m. Eastern time. Then we have micron earnings after the bell, which, again, is not economic, but it's going to tell us something about the AI trade and the demand for memory chips. Then on Friday, the non-farm payrolls report. And that's going to be the end all be all right there. The jobs report. How strong is this economy? If it's super strong rates, honestly, it would make sense for them to go up. The Fed has to raise rates to combat a strong economy. But we're seeing some weakening in some of these other economic data. Yet at the same time, again, like I said, rates are still going up. This is an intriguing time. It's a time where every investor must be focusing on the data and what the charts are saying. I'm here to do my best to guide you guys. I thank you so much for watching these videos. I really do appreciate. Please like, comment, share, tell your friends and family. I'm going to do my best to always bring you a straight shooter approach. As we say, all charts and no BS. Thanks and have a wonderful rest of your day. Take care.