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ST equity outlook appears grim as we enter 2026.
Long-end yields are preparing for a breakout, which will put pressure on equities, especially long duration stocks like NVDA.
US10Y
NQ1!Rising commodity prices are a looming concern as we head into 2026. Such surges are often followed by an equity correction, which I believe could begin as soon as 26Q1. The AI theme has
done the heavy lifting over the past two years as the rest of the economy stumbled. This may be the last straw. As we saw in 25Q4, the market is showing growing concern about an AI bubble,
which I agree with. Key names such as NVDA and ORCL have been under pressure, while speculative names such as OKLO, ARKK, and quantum themes have quietly halved. These tend to lead to the downside. And even as SPX printed a new ATH, NDX remains below key resistance.
NQ, our uptrend lines acted as support in October and early November, and it is now acting as resistance, with NQ failing multiple times to break through while SPX printed ATH.
As we start the year, I'd like to make a few changes to our blog. Daily commentary will cease, though ES1! levels will still be provided when VIX is high. I will begin posting cross asset allocation updates with entry and exit notes after the market closes for positions opened or closed that day, and before the market opens for overnight position updates.
I have been warning about stagflation for a few years, and it is playing out as expected. The US debt crisis is getting worse, and long end yields are not following the Fed's rate cuts, which suggests inflation is here to stay. Yet over the weekend, an unexpected and swift move by the US government to kidnap Venezuela's President Maduro, whose country has the largest oil reserves in the world despite outdated infrastructure. Index futures initially reacted slightly negatively over the weekend, but quickly recovered on Sunday night, and most are in the green premarket. Suppressed oil prices have been the one major headwind to our stagflation thesis, given oil is the most important commodity. It could take a year or two for Venezuelan oil to catch up, as infrastructure takes time to deploy. Markets may start pricing in the expectation of additional supply over the coming months, even though it could take years to fully play out.
XAGUSD
XAUUSDAt the same time, we expect gold to continue to outperform despite rising long end yields, as the dollar debasement theme continues to play out into 2026. Gold and silver held their rising trendline support during the recent pullback.
ES1! resistance levels: 6928-6930, 6940-6945
ES support levels: 6904-6906, 6885-6890
ES1! stalled around 6930 yesterday and was rejected at the same level overnight, which is the upper end of the range I flagged last week.
NVDA Daily, NVDA is also approaching resistance from below. The impending correction is likely to be accompanied by NVDA breaking below the major support zone around 167.
NQ1! Daily, approaching the uptrend line resistance from below.
XAUUSD s rise is concerning. We saw similar moves in the 1970s stagflation period and again pre GFC. A storm is brewing while SPX is pressing toward ATH. I expect an equity correction that could begin as early as January.
VIX hit the lowest level of the year pre market
JP10Y Yields continue to rise alongside Gold and Silver. For JP10Y (Japan 10-Year Yield), the warning signs cannot be more dire.
ES1! resistance levels: 6929-6933, 6945-6950
ES support levels: 6902-6904, 6895-6898
XAUUSD Daily, gold has finally broken above the resistance
US10Y Daily, the long end remains a concern, with US10Y set to break its wedge to the upside and potentially put 5% back in play.
US10Y Daily, the long end remains a concern, with US10Y set to break its wedge to the upside and potentially put 5% back in play.
NQ1! Daily, set to test the resistance from below
NVDA Daily, remains above the line of sand
SPX Daily, the index has avoided a double top for now
SPX Weekly
