Powell Joins the Club

Unless he publicly walks back yesterday’s widely misquoted comments, Powell has officially joined the club of Fed chairmen with unquestioned allegiance to a rising market. The actual quote:

“Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy — that is, neither speeding up nor slowing down growth.”

Note, this is not the same as “just below neutral” as most of this morning’s headlines state. Nevertheless, it’s a huge divergence from comments in October that the rate was “a long way from neutral.”

The 2Y dipped a bit. But, the more interesting move IMO was the 10Y — which continues toward our long-held downside target. One might think this would mean DXY is finally breaking down. But, USDJPY — which managed to nail both of our intraday targets — has clung stubbornly to channel support. Until it breaks down, the downside case for equities is iffy.Even more interestingly, yesterday’s short squeeze occurred without VIX dropping through its SMA50, which we identified as an important line in the sand for bears. So, things aren’t as clear cut as one might think after such a massive meltup.