Indices broaden their losses as bond yields ask harder questions, with NASDAQ tech sectors feeling the pinch from rising borrowing costs (especially those that finance buybacks), especially as the index is devoid of financials. Bitcoin posted its habitual 30% decline off the highs, testing the key 21-DMA. No coincidence that BOTH Tesla & Bitcoin are 30% off their highs. Or is it? CFTC FX positioning remains in a frustrating freeze but oil positioning is a spot to watch closely. Here is Ashraf's video on indices, fx, gold and oil recorded last night.

Bitcoin hit an air-pocket on Monday in a quick fall to $46,610 from $53,000 before bouncing all the way back to $55,000. Monday's Bitcoin drop took only minutes and highlighted the fragility of the world's biggest crypto. At the same time, it highlighted the resilience of the bull market with dip buyers wasting no time at all. Ultimately, that's the signal from here with retail still at the point where they'd rather double up than cash out.

DXY stabilised at the curcial 90 support, while XAUUSD failed at the 1815/16 predicted in Ashraf's video above, whole US crude oil counts the minutes before it returns to 57--Premium subscribers can see the rationale above. 

Meanwhile, commodity markets continue to strengthen and that's providing a lasting tailwind for commodity currencies.

CFTC Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR +140K vs +140K prior GBP +22K vs +21K prior JPY +37K vs +35K prior CHF +14K vs +11K prior CAD +8K vs +10K prior AUD -3K vs -1K prior NZD +12K vs +12K prior

The speculative market continues to be locked in place. Even the latest rally in GBP is being met with skepticism while nothing seems to be able to jar euro positioning.

One spot that is notable is the oil speculative position, which is right in the middle of the 5-year range at just over 500K contracts. Could specs be what drives the next leg of the move?

Higher than expected US jobless claims further pushed indices lower until stailisation towards the last 2 hrs of the day. Dont forget that Treasury Secry Yellen will speak at the close. A sensational US retail sales report raised fresh questions about the stimulus and inflation outlook. The yen was the top performer while the Swiss franc lagged. Ashraf updates the latest chart on that Feb 2020 analog. 

US retail sales blew away expectations on Tuesday, rising 5.3% compared to 1.1% expected. Core measures were even stronger as $600 stimulus checks immediately went to work. It wasn't just a one-month effect either, sales for Nov-Jan were up 4.6% y/y.

That big beat led to higher revisions for Q1 GDP and should drive assumptions higher regarding the $1400 check that's likely to be authorized in the next month.

On that front though, the market is feeling some jitters. The size and contents of the package are still up in the air and flat equities and lower Treasuries yields Tuesday may be reflecting some of that uncertainty.

The dollar tried to break higher but was also reeled in as the market grapples with stimulus, the inflation and the Fed. On the latter front, the Fed minutes didn't sound any alarm bells and there was a consistent message that policymakers believe the anticipated bumps in the months ahead will be temporary.

The commodity and housing markets are telling a different story though. Crude briefly fell on a report about Saudi Arabia bringing back supply in April but it quickly erased the dip and ran to a new high on US inventory tightening. Meanwhile virtually every other commodity continues to run with supplies tight everywhere.

In the housing market, the home builder survey rose to 84 from 83 and remains near all time highs reached late last year. In the day ahead, the US January housing starts report is due. There is a growing risk of a US housing boom with all the knock-on effects that entails. While we agree that much of the inflation in the spring will be temporary, the prices rises in commodities and housing look increasingly durable.

We couldn't read an article or watch financial TV for any stretch on Tuesday without hearing the worlds 'inflation' and 'reflation' but the Fed continues to preach that they will look beyond short-term price rises. The pound was the top performer while the yen lagged. Meanwhile, Ashraf shares a few charts -- the upper left chart shows how the break out in real yields is (red graph) is threatening gold, which is boosting the US dollar (lower left chart, while Gold/Silver ratio remains pressured but supported. 

US 10-year yields busted through the 1.20% barrier on Tuesday, piercing a double top and promptly running to 1.30%. US 30s broke through 2% in a similar manner.

The moves in bonds kicked off a big bid in the US dollar and USD/JPY hit a 4-month high at 106.00.

The market is increasingly focused on the post-vaccine economy and the likelihood (certainty?) that prices will rise with the surge and demand and against the backdrop of very easy y/y comps.

The trigger this week may have been energy with WTI following Brent above $60 and natural gas prices surging on cold weather. Lumber and metals prices are also at multi-year highs while consumer goods continue to be short supply.

The Fed introduced a new communication angle on Tuesday with SF President Daly saying “unwanted” inflation is not a practical risk and that fear of inflation could cause millions of jobs.

We'd argue that real inflation could unchecked by a complacent Fed cause millions more but that's the debate that will rage in markets in the months ahead.

As for bonds, the break higher leaves little standing in the way of 1.50% in 10s but so far equity markets have taken the medicine without a hiccup.