Futures are flat this morning, but this comes on the heels of a 206-pt rally since ES tagged the 2.24 Fib extension at 2728 on Jun 3. We’re used to seeing markets ramp higher before FOMC decisions. When the Fed disappoints, the ramp provides a bigger buffer for the subsequent fall. When the Fed delivers, it provides an easier point from which to break out.
We’ll find out in a few hours which we’re facing today. But, it seems to me that Trump dashed any hopes of an imminent rate cut when he announced yesterday that trade negotiations have taken a positive turn.
With nominal employment looking strong and coincident economic indicators whispering but not yet screaming “recession” we might get a less dovish statement than many observers are expecting. And, does the Fed really want to give in to the latest tantrum from the White House? I’ve raised four children, and I can tell you this is almost always a really bad idea.
Regardless of the FOMC’s decision, rates should continue to drop. TNX made a new intraday low on Monday, and the charts indicate it’s still not done. Both it and the 2Y have broken trend. If the past is any indication, the 2Y will drop faster than the 10Y and the spread will blow out — which is bearish for stocks.In any case, many of our factors are indicating lower equity prices lie ahead.
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