Tuesday -- The 1 Kilometer Skyscraper, Low Odds Continue

S&P E-mini Futures:
Looking good, yet in the middle of a multi-day range.

News:
Today's focus, inspired by the following headline, is the importance of an inverted yield curve and its relation to malinvestment and the economy.

Saudi Arabia to build world's tallest tower, reaching 1 kilometer into the sky

Paul F. Cwik, Ph. D., Adjunct Scholar of the Foundation for Economic Education and of the Ludwig von Mises Institute, wrote:

"The root cause of the inversion of the yield curve is malinvestment.

"Monetary injections lead to a disequilibrium between consumption and investment.

"In their attempts to prevent their individual projects from being liquidated, entrepreneurs will cause the yield curve to flatten, become humped or even invert as they scramble for financial capital (even when the monetary authority adopts a policy of easy credit).

"Thus in every recession since the mid-1950s, an inverted or humped yield curve occurred no more than 5 quarters prior to the upper-turning point of the business cycle."

LPL Financial's Jeffrey Kleintop has also noted that the yield curve inverted just prior to every U.S. recession in the past 50 years.

"That is seven out of seven times — a perfect forecasting track record," he wrote.

"The yield curve inversion usually takes place about 12 months before the start of the recession, but the lead time ranges from about 5 to 16 months."

"The peak in the stock market comes around the time of the yield curve inversion, ahead of the recession and accompanying downturn in corporate profits."

The yield curve is inverted when short-term interest rates (e.g. the 3-year Treasury) are higher than long-term interest rates (e.g. the 10-year Treasury yield).

We're not there yet, but with 1) the yield curve pointing toward inversion, 2) 3-month treasury yields at their highest levels in seven years, and 3) the highest number of distressed bonds trading in six years, it may be prudent to take a look around.

Skyscrapers attempting to reach 1 Km into the sky may mean that social mood is ebullient globally and may be ready for more of a reboot than previously thought.

FX:
AUD ripping on hot building approvals number (another symptom of malinvestment -- excess cash flowing into real estate projects).

EUR higher ahead of Thursday's ECB meeting is kinda odd.

Treasuries:
Still pointed toward inversion.

Energy:
WTI crude and NG lower.

Metals:
Gold, silver, and copper higher.

S&P Outlook:
The market feels capped by the 2100 level, with several potential lower levels to shoot for below.

1965 remains the 61.8% Fib retracement level and should be considered reachable, even though it would not jeopardize the uptrend at all.

Sustained trade above 2100 could easily produce new all-time highs.

Asia had a great night, while the DAX and the CAC are notably sitting out the rally in Europe.

Still feels like a low odds environment for either side.