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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……
Unrelated to anything else I’m about to say: the two biggest cultural influences of my life are (a) Star Trek, the original series and (b) Monty Python’s Flying Circus. I mention this because Netflix now has just about everything related to Monty Python you can imagine, including a wonderful documentary I’m watching now called Almost the Truth. If you are a MPFC fan and have Netflix, I encourage you to check it out.
On less funny subjects……..I am very pleased at how bonds are continuing to breakdown. It is precisely what I hoped would happen.
President Donald Trump unleashed another attack on the Federal Reserve, calling the central bank his “biggest threat,” in an interview he gave to Fox Business Network. “My biggest threat is the Fed,” Trump said, according to excerpts released by the network ahead of an interview to air at 8 p.m. Eastern. “Because the Fed is raising rates too fast and it’s independent so I don’t speak to them but I’m not happy with what he’s doing because it’s going too fast because you looked at the last inflation numbers they are very low.” When pointed out to Trump that he nominated Jerome Powell instead of Janet Yellen, the president said he wasn’t blaming anyone. “I put him there and maybe it’s right maybe it’s wrong but I put him there.” He also referenced the other nominees to the Fed he’s made. “I put a couple of other people there I’m not so happy with too but for the most part I’m very happy with people.”
“Because the Fed is raising rates too fast…”
The 2 year note players in the bond market are and have been raising rates too fast if anybody is; and I don’t think they are. But Trump does have a point in that it appears the Fed is playing catch up on his watch after being way too slack on the previous administration’s watch (as I used to routinely bitch about). (more…)
Ten-year Yield has climbed to a new post-July 2016 (1.32%) high at 3.17%, the highest yield since July 2011, over 7 years ago!
From a technical perspective, today’s surge above May-Oct 2018 resistance at 3.11% is a reaction to very strong recent data showing strong ADP Payrolls for September (230,000 vs. 185,000 expected), and impressive ISM Non-manufacturing data across the Headline data (61.6 vs. 58 expected), as well as the sub-surveys in Business Activity, Prices, Orders and Employment for September.
With 10-year Yield perched at new 7-year highs at 3.17% ahead of Friday’s BLS monthly Jobs Report, the set-up for Yield is positioned for upside continuation and acceleration. (more…)