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A ‘wild card’ segment has been added to NFTRH reports because I
wanted the freedom to go out of bounds in any direction, beyond our
usual areas of disciplined coverage. Last week it was a look at the
This week it is Fed policy with a side trip down memory lane,
trying once again to illustrate why today is not at all like the ZIRP
era and why the post-2015 re-connect between the Fed Funds rate and the stock market does not bode well for stocks, assuming the Fed really is going soft.
Excerpted from tomorrow’s edition of Notes From the Rabbit Hole, which will also include loads of actionable analysis along with the more theoretical stuff below…
Below are the Opening Notes and Bond Market segments from last Sunday’s edition of Notes From the Rabbit Hole, NFTRH 530. Jerome Powell was actually more firm than I expected. Atta boy Jay! Aside from my prognostication the more important stuff (IMO) begins at the 4th paragraph. That is where I put on my tin foil hat and tell what I think. It does seem to dovetail with what we saw today out of the Fed chief.
Opening Notes: FOMC at Center Stage
It is likely that the Fed is going to raise the Funds rate on
Wednesday because this is a confidence game and a Fed suddenly showing
weakness and doubt could exacerbate the market’s already frayed nerves.
As a side note the 76% reading of CME futures traders expecting the hike
to happen has not changed in the last few weeks.
Well, it’s green on the ES and NQ for yet another day, but at least it’s not by much. Let us instead turn our attention to bonds, which I continue to contend are in trouble. Here’s the long-term continuous chart, featuring the channel failure:
“The Harbinger of Doom”? Of course we (well, the media) are talking about the yield curve AKA Amigo #3 of our 3 happy-go-lucky riders of the macro. I have annoyed you repeatedly with this imagery in order to show that three important macro factors needed to finish riding before situation turns decidedly negative.
Amigo 1: SPX (or stocks in general)/Gold Ratio
Amigo 2: 30 Year Treasury Yield
Amigo 3: Yield Curve
In honor of Amigo 3’s arrival to prime time let’s have a good old fashioned Amigos update (going in reverse order) and see if we can annoy a few more people along the way. 🙂 (more…)
Hey, let’s face it, no one can screw up an election quite like the state of Florida, right? I guess that’s what’s driving the markets so much higher today. Anyway, I’m keeping a close eye on the bonds, which I believe will soon be repelled by those plunging moving averages……