From my morning paper…….mercifully, no injuries were reported.
Slope of Hope Blog Posts
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I used to make fun of the FOMC rate hike “decision” language in the mainstream media because under the Obama administration and its economic policies overseen by the Fed’s monetary policy, there really was no decision, was there? It was ZIRP-eternity, interrupted by a lone and token rate hike in December 2015 (the Dec. 2016 hike does not count because the transition to a new administration and policy regime was already known; in effect, the Fed has already made its first hike under Trump).
According to the traders who make up the Fed Funds futures, there is no decision tomorrow, either. From CME Group, we have virtually no one predicting two successive rate hikes.
Our primary scenario here is that this is likely to be the last retracement before a likely swing high to be made over the next few days. At the moment that’s looking pretty good, with the retracement low at rising support from the 2233 and the low this morning has confirmed a rising wedge on SPX for this current move, and a rising channel on ES. On a break back over the 50 hour MA on SPX, currently at 2281, there would be a double bottom breaking up with a target in effect at the all time high. We’d be looking for a rejection at that retest in the second high of a double top looking for a return to the possible H&S neckline at 2233, or continuation up to rising wedge resistance, ideally to be hit in the 2310-20 area within a week or so. We’re favoring the higher scenario at the moment. This rising wedge on SPX is of course also an Elliot Wave ending diagonal, which is the ideal pattern to finish this move up.
Economic data released today on the Chicago PMI (Purchasing Manager’s Index) shows how much the U.S. economy is urgently in need of fiscal stimulation.
With barely a whimper above the 50 expansion level, the health of its economy is set to drop into contraction territory soon (as it did in 2009 following the depressed signals forecast by similar low numbers produced in 2007/08), unless Congress begins to cooperate and focus on real issues that support its claims of being number one in the world arena when it comes to economic (and military) might, instead of playing economically dangerous political games in unnecessarily obstructing the advancement of the new Trump administration, cabinet confirmations, and economic and security agendas.
My intermediate and longer term technical set-up work on 10-year US Treasury yield argues that benchmark yield is in transition from a 35-year bear Market (dominant downtrend) into a multi-year bull market (dominant uptrend).
From 1981, when 10-year yield peaked at 15.84% amid concerns about rampant, uncontainable inflation and stagnant growth (“stagflation”) precipitated initially by the 1973 OPEC oil embargo, benchmark yield steadily and relentlessly declined to a post-financial-crisis 2016 low at 1.32% (see Charts 1 and 2).
From a technical perspective, I can make the case that all of the action in yield from mid-2011 into early 2017—a 5-1/2 year period– represents a major base formation at the conclusion of a generational yield bear market (see shaded area on Chart 1). That said, to confirm the end of the 5-1/2 year transition from bear to bull market, yield must climb and sustain above significant resistance lodged between 2.75% and 3.30%. Yield currently is circling 2.50%.