Here Comes Inflation: Energy and USD Surge
Energy services is now the top fund, displacing Greece and homebuilders. Among the top movers in the Slow momentum gainers are energy funds and currency funds that are long the U.S. dollar.
If financial markets have become a momentum machine thanks to trillions in excess money still sloshing through them…and if that momentum is pouring into long-inflation trades…then the Federal Reserve’s pussyfooting on rate hikes is about to blow up in its face with a terminal (for the economy) spike in energy costs.
Fast momentum is across the board inflationary:
Tech is trying to make a comeback:
Combining fast with slow, it’s pointing to a breakout in energy. Rarely are there false signals in bull markets. A fake-out would be bearish across the board. A breakout in energy would be bullish for energy and confirm the momentum system is back on track, but it would likely trigger a bond market sell-off that will spill into major indexes via technology selling.
As for what’s losing momentum right now:
Some core economic in there such as banks, transports and industrials…along with precious metals and commodity exporters such as Peru and Brazil. Maybe parts of the market are already sniffing out a spike in crude is bad news.