Hedge_Of_The_World

Futures Flat, Rates up to Bat

Short
AMEX:SPY   SPDR S&P 500 ETF TRUST
US futures traded sideways in the overnight session, as investors took in the view, and breathed in the thin air from the top of Mount Everest. We saw a light sell off yesterday, which was relentlessly bought into, and the moral of the story was this: bulls were able to successfully defend the 21EMA on the hourly at the open, throughout the day, and again at the close. The status quo projection by market participants, is that the Biden Administration is about to release a colossal stimulus proposal, which could potentially make the recent one seem like a weekly allowance. The truth is, Biden previously said he plans to raise taxes, and may even implement a wealth tax to fund much of his incredibly expensive plans. But, how does that make any sense if he plans to also cheer on the FED as they continue to debase the dollar, while growing the fiscal deficit even further? Why tax anyone, ever again, if you can just print new money constantly, and borrow even more if need be?

European markets traded down in the overnight session, as many european nations continue to struggle with COVID-19, and the effects of lockdowns on the economy. Bitcoin bounced back immensely from a 32K handle back to 36k, no surprise there. The 10Y yield is skyrocketing (seemingly unnoticed), and hit a high of 1.175% overnight. We've discussed what the implications of this move might be, and where rates may be heading next. For those of you who haven't been following, the 10Y yield is now up 130% since the beginning of August. Having said that, there's a possibiliy the FED may continue to change the rules of the game, and institute yield curve control (YCC) in the near future, to continue to artificially suppress rates. The mere fact that everything they've done to this point, hasn't worked, is no surprise to me. How could they have solved any (real) economic problems, when they're implementing solutions that simply aren't effective for main street?

According to Nomura, CTA's could turn short US Treasuries at any moment, due to the fact that we've now breached the key 1.10% level. This would result in a market correction of about 20% according to analyst projections at Morgan Stanley . We've been seeing downward pressure in the bond market in recent months, as the mere mention of tapering asset purchases by members of the FED, spooked bond investors. The dollar has held onto a 90 handle overnight, but is seeing some pressure here as the base case remains to be further dollar debasement. Oil is rallying hard, and is back to 10 month high's as of this morning, and we're now back at a 53 handle. We may see some pressure in oil markets as the week progresses, due to the anticipation of shrinking demand, and Exxon apparently finding a new massive reserve in Guyana.

Gold is looking awfully toppy , and we're seeing a clear reversal on the monthly candle, with both the MACD , and RSI rolling over. SPY is back at the 21EMA on the hourly, and looking weak as we approach the open. The weakness could be attributed to the circulation of a new report by Goldman discussing the rise in real rates, and it's potential impact on equity prices. Trade accordingly!
Comment: If you guys are interested in our live play-by-play, join me over at the Hedge of the World website. Cheers!
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Comments

Great respect for you
+1 Reply
@abel11, Thank you very much buddy! That's so kind of you to say.
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Great work mate! Keep it going. Big dump will happen soon. Trust the Trump Dump truck. He will not leave markets up and high. Cheers!
+1 Reply
@VolkerRules, Thank you, my friend! Great to see you. Yes, and I think today will be very telling. Looking forward to the FED meeting. Cheers!
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I would have restored faith in this country if SPY went back to sub 300.
+1 Reply
Hedge_Of_The_World whatstheplay69
@whatstheplay69, Agreed. 300 is a major target of mine, actually. 322 first, but then another leg down to the 300 level, and potentially lower. Many traders are calling for 400 in the near term. But, I don't see it happening. I think the FED has done more than it intended, and is now going to lean on Yellen as Treasury Secretary to advocate for a strong dollar, and renewed faith in the US economy.
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whatstheplay69 Hedge_Of_The_World
@Hedge_Of_The_World, Oh no, we're going to 400. Jerome made a commitment to the 0.001% that their assets would not lose value.
+1 Reply
Hedge_Of_The_World whatstheplay69
@whatstheplay69, Lol. You might be right buddy, what a whacky world we live in. I have to believe this ends at some point.
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So, what exactly happens if the 10-year note continues its parabolic climb up to 2%?
+1 Reply
@stately, Hey, thanks for the question! Since the 10Y yield is the official risk free rate, it's rise will put downward pressure across all risk assets, and help support a stronger dollar. Because risk assets are so incredibly sensitive to rates right now, even a slight rise in the yield to 2% could result in a 22% correction in the Nasdaq, according to Morgan Stanley. I hope that helps! We discussed this in more detail yesterday in our live analysis if you'd like to continue reading more. :)
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