The rising dollar and intermarket outcomes - BBH

Analysts at Brown Brother Harriman noted the strong dollar finish to last week's business.

Key Quotes:

"The rising dollar ahead of the weekend put a damper on oil.  Technical indicators such the MACDs and slow stochastics suggest a more sustained correction is likely nearby if it has not yet begun.   Talk now that some of in OPEC are talking about an agreement, perhaps on quotas as early as next month may feed such price action.  We are skeptical. The usual proponents, like Venezuela and Ecuador, are the antagonists.  The Iranians are only about half way toward returning to output levels seen before the embargo.  Agreeing to an output cap before returning output to status quo ante raises the cost of surrendering (or postponing) their nuclear ambitions.   

The September light sweet contract met and overshot the 61.8% of this year's $20 rally (from a little below $33 to a almost $53), but finished the week above it (~$40.45).  Initial resistance is seen $42.40-$42.80, with a break allowing for $44.00-40 

US 10-year yields have not been much above 1.60% since the UK referendum. The rise in yields after the jobs data put them back to the upper end of the range.   The September bond futures found support near 132-00 before the weekend.  However, a move below last month's low (131-19) which corresponds to the 50% retracement of the rally (decline in yields) since the end of May, is needed to boost confidence that a top of some import is in place.  Recall that 130-21 was the low from the UK referendum.   

The S&P 500 eased on profit-taking at the start of the week.  The pullback saw the S&P 500 slip below its 20-day moving average for the first time in a month.  Buying, perhaps encouraged by first, lower interest rates, as the Australia cut rates and the UK rejoined the QE club, and then by the economic strength implied by the jobs data, lifted the index to new record highs before the weekend.   The pre-weekend gain of about 0.75% was the largest since the June employment data was reported in early July.    The S&P 500 recorded a bullish outside up week."