From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley

Treasury yield spreads are contracting.

Inflation has been the talk of the town in recent weeks. But, now that the Federal Reserve has finally joined the chorus, the market seems to be headed in a different direction. At least over the near term.

Short rates are holding up just fine, but the longer end of the curve has been under serious pressure.

We’ve been closely monitoring long-duration rates for signs of further weakness. As we write, the 30-year is violating its summer lows, and the 10-year is testing a critical level of interest around 1.40%.

The bulls really need these levels to hold. If they don't, we’d better get used to the recent volatility--because it’s likely to get worse.

Let’s take a deeper look!

This is a weekly chart of the US 10-year yield:

We’ve been focused on the 1.40 level for several years now... and for good...

From the desk of Willie Delwiche.

Stocks finished a volatile month of November in downbeat fashion, with breadth deteriorating and downside momentum expanding. Global equities bore the brunt of the weakness, though there was plenty of it to go around. Just one month removed from a new high in the All Country World Index (ACWI), a quarter of the country-level indexes that make up that composite finished November at new 12-month lows and only 10% were above their 50-day averages. Domestically, sector-level price, breadth and momentum trends showed a degree of weakness that in the past has been associated with index-level drawdowns of 7% or more and yet the S&P 500 finished November less than 3% from it's all-time high.

From the desk of Willie Delwiche.

Key Takeaway: The bulls came out expecting strength but were served a healthy dose of volatility. What on paper is a historically favorable season has turned out to be quite the opposite. New highs quickly fell to the wayside and into the rearview mirror as participation crumbled beneath the surface. In the wake, investor optimism is now accompanied by a sobering caution. The need for repair beneath the surfaces is great for both domestic and international equities, and is necessary to re-build investor confidence. For now, there are no significant signs of pessimism emerging. But volatility and pessimism can be dangerous dancing partners, each leading the other to the edge of the dance floor.   

Sentiment Report Chart of the Week: Investors’ Love Of Equities Undiminished

Investors continue to pile into equities. YTD ETF flows through November show equity funds attracting nearly $600 billion of inflows, with two-thirds of this heading toward US equities. Bond fund...

From the desk of Steve Strazza @Sstrazza

Plenty of stocks continue to show relative strength through the recent volatility. We still want to be buying these leaders.

And plenty of stocks continue to underperform, having already violated their year-to-date ranges to the downside. Those are the names we want to be looking at to short.

But most stocks are simply in "no-man's land" right now.

Some were rejected at their year-to-date highs. Others broke out and quickly failed. It doesn't matter how they got there. What matters is they're now "back in the box" and facing the very same overhead supply levels they've faced for much of 2021.

It looked as if markets were making progress earlier this month. But it turns out most of these new highs were -- dare I say --transitory?

Let's take a look at financials, using the group as a case study for how we want to approach all the range-bound patterns we see out there.

We really hate to sound like a broken record, but the broader macro environment and crypto's correlation to legacy markets is really one of the most important developments to watch right now.

As we've demonstrated, investors' on-chain buying regime remains intact, so, when these headwinds from traditional markets ease, the bias looks to be higher for Bitcoin and the overall asset class looking out on an intermediate to long-term horizon.

But, until that happens, we anticipate some more choppy action in the near term.

We publish our thoughts on traditional markets every day, but let's quickly summarize a handful of key indexes we're watching right now.

I got all excited when Russell 2000 -- as measured by $IWM -- broke higher out of the 8-9 month range back in early November. To me, that felt like a big sign that stocks on the whole were about to go on a big bullish run into year-end.

Well, the sad trombone has been played and the breakout was short-lived. And as you can see from this chart, $IWM in recent weeks has completely retraced the breakout and has fallen right back into the middle of the previous range:

Man, what a letdown --- for the bulls.

But us options traders over here smell an opportunity!

We debuted a new scan recently- The Outperformers.

The Outperformers is our newest scan that pinpoints the very best stocks in the market. It’s the fastest, easiest way to find quality names that are primed for major moves.

The goal is that as the market rally progresses, the sector rotation within the market will reflect in this scan. So while our Top/Down Analysis helps us with the broader view of the market, this Bottom/Up scan makes sure that we catch the slightest change in sentiment.

This is the video recording of our November 30, 2021, Tuesday Evening Crypto Livestream.

This is the video recording of our November 30, 2021, All Star Charts Crypto Livestream.

From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley

As we near the close of another month, crude oil is once again front and center.

At the end of October, black gold was ripping to new seven-year highs while interest rates rose and cyclical stocks kicked back into gear. 

Today, this picture has dramatically changed. 

Crude oil is currently about 20% off its highs, as prices have collapsed back below our risk level.

Crude dropped $10 during last Friday’s volatile session and continues to slide lower this week. Just look at this bearish candlestick on the monthly chart:

Not only is this an ominous candlestick formation. It's also occurring at a key level of interest at the multi-year highs from 2018. This failed breakout is setting up nicely for a fast reaction to the downside. 

Most commodities were already in consolidation phases ahead of the recent sell-off. Now the entire...

From the desk of Willie Delwiche.

With volatility on the rise and increased evidence of fissures beneath the surface of the market, we have reduced equity exposure in our Tactical Opportunity portfolio. The deterioration at this point has not been significant enough to warrant reducing equity exposure in our Cyclical portfolio, though we have made some changes there as well to stay in harmony with the relative leadership trends we are seeing both in the US and globally. 

For every asset you own, it's essential to understand its drivers.

We do this all the time when looking at the components of ETFs and funds and evaluating intermarket correlations, and crypto shouldn't be any different.

As we outlined in yesterday's note, the recently observed increased correlation between Bitcoin and legacy markets is something to be mindful of in the near term.

Volatility in the macro environment is likely to be a headwind for most major crypto assets in the coming weeks.