I’ve made no secret of the fact that I expect a rate hike in September. Investors are weary of the drip, drip, drip of slightly higher indices, and SPX is very much in need of a backtest of the critical Fib at 2138. In fact, I’ve had a 2138 target on Sep 12 ever since August 19 [see: The Big Picture.]
We’ve talked about the importance to the Fed of maintaining a high US dollar. It’s been painfully obvious from all DX’s stick saves over the past two weeks. Without a high dollar, we’d have more noticeable inflation. More noticeable inflation would raise too many inconvenient questions about the Fed’s easy money policy — which has been sold as the very solution to low inflation (as readers have known for years, its real purpose is to re-inflate asset prices.)
That’s why a September rate increase which prompts a temporary decline to backtest 2138 — the biggest decline since Brexit at a whopping (sarc) 2.5% — makes so much sense.
Or…is that simply what the Fed is trying to have investors believe? We all know about open market operations; what about psychological operations? With the US dollar back above its resistance zone through jawboning alone, is an increase still necessary? What if SPX reaches 2138 today?
We remain short from Wednesday afternoon.
continued for members…
Sorry, this content is for members only.
Already a member? Login below…