SUMMARY OF Fed DECISION (Kobeissi Letter)
The bottom line-
On June 3rd, the Daily covered the long bonds.Here are the thoughts-answers from June 3rd in bold, answers today in red bold:Monetary Policy: June Fed meeting – When the Fed signals a shift toward lower interest rates, bond prices tend to rise-are they getting ready to do a June cut? They did not cut and may not cut until after the election-that is a good thing for confidence in the economyEconomic Conditions: A moderating economy, dovish central bank discourse, and forecasts for milder GDP growth can all contribute to bond rallies. At the end of this week, we will see the updated non farms payroll number – is unemployment increasing? Jobs number was strong, but nuanced-Fed says economy strongInflation Expectations: If inflation remains subdued, bond markets anticipate progress, leading to rallies – PCE last week came in with some areas of inflation subdued. CPI comes in flat-not enough for the Fed to cheer-as not near their target, but they hinted they could lower if inflation falls furtherSupply and Demand: When demand for bonds exceeds supply (more buyers than sellers), bond prices rally. China has been selling US bonds-are they done? Seems like China paused-and could go back to selling-yet the demand from recent auctions in the US are betterHence, the Gordian Knot is yet to be untied (Monday’s Daily).And the long bonds rallied right to the 50-week moving average and stopped.If TLT clears, note the Leadership chart. We would be concerned if TLT begins to outperform SPY.
ETF SummaryS&P 500 (SPY) 545 is a good target-but no signs of a reversal yetRussell 2000 (IWM) Cleared the 50-DMA but needs to hold 201Dow (DIA) 40k resistance and also an interesting turn to redNasdaq (QQQ) All-time highs which still hard to argue withRegional banks (KRE) Watching the range 45-50 CAREFULLYSemiconductors (SMH) Unless this breaks 250-strong and on ATHsTransportation (IYT) 63.80 area now important support with 66-67 the area to clear for healthBiotechnology (IBB) 135 support 140 resistance-big eyes here this weekRetail (XRT) 75-80 trading range to breakiShares iBoxx Hi Yd Cor Bond ETF (HYG) Looks better yet still in a range until it clears 78More By This Author:What Unties The Market’s Gordian Knot?
One Stock Doing The Heavy Lifting! Interest Rates Head Higher On Friday.
Precious Metals-Has Anything Really Changed?
