The futures are off moderately following an FOMC meeting that surprised many observers. Powell threw cold water on the bulls’ insistence that we’d get another rate cut in December.

“A further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it.”

The algos made up most of the initial losses, but hinky earnings reports by some of the biggest stocks in the Mag 7 (META and MSFT) weren’t well received.

continued for members…

The charts we discussed yesterday that caused us to doubt new highs continue to do so.

The currency markets to the rescue! It is said that Trump has a friend in the new Japanese premier Takaichi. Note that USDJPY is threatening a breakout a few days after their recent meeting. I have expected this breakout would be the event to rescue markets if necessary. It’s still too bad, as it will hit the Japanese consumer where it hurts.

Note that Japan’s 10Y is still well above historical levels……because its inflation is still well above historical levels……largely because oil prices in yen are still well above historical levels.

Bessent is “encouraging” Takaichi to allow rates to increase in order to battle inflation, though he is among the loudest advocates of lower interest rates in the US (inflation be damned.)

What it boils down to, of course, is the stock market’s performance. When USDJPY soars, it helps the Nikkei but it means the USD is rising, which lately has not been helpful to US stocks. It’s another reason Trump et al have been agitating for lower rates in the US.

TNX’s potential breakout has to be concerning to Trump, who will probably pin hopes for success in the midterms to the market’s performance.

The biggest surprise to traders was the pop in bond yields following Powell’s statements about future rate cuts. The 10Y broke out and is threatening a move back above the SMA50.

Getting it back down below the red TL could result from a rapid decline in CL/RB…

…but it’s more likely to result from an overdue tumble in stock prices. A backtest to the channel midline would be a good start, with lots of other backtest targets below that.

Keep an eye on the 2s10s, which has been locked in a narrow range for way too long.

GLTA