Mid-week market update: The combination of the Quarterly Census Employment and Wages (QCEW) weakness and a soft PPI report has moved the market to expect to at least a quarter-point rate cut at the FOMC meeting next week. There are even whispers that the Fed may even move by a half-point, though the odds is...
In the wake of the August Payroll Report, let’s review the Fed’s dilemma and the views of Fed Governor Chris Waller, one of the frontrunners to be the next Fed Chair. Is monetary policy restrictive? Yes, by a number of measures. The Cleveland Fed recently published a study that estimated r-star, or the neutral...
The Fed’s annual Jackson Hole symposium is intended for participants to discuss the challenges they face and the long-term implications of different ways of thinking about monetary policy. Much like the ASSA conference held every January or the annual ECB conference in Sintra, it’s full of academics giving papers with Greek letters lying on their...
Trump’s pressure for a rate cut from the Federal Reserve is growing. Treasury Secretary Scott Bessent said in a TV interview last week, “If you look at any model for the Fed Funds rate, it suggests that we should probably be 150, 175 basis points lower.” Stephen Miran, who is Trump’s pick to fill...
As reporters tried to elicit the Fed’s reaction function from Jerome Powell during the July post-FOMC press conference, Bloomberg’s Michael McKee asked a very different question relating to the juxtaposition of fiscal and monetary policy in the years ahead: McKEE: Do you have concerns about the cost to the government of keeping rates elevated for...
It’s official, my long-term market timing model has confirmed a buy signal at the end of June. It first flashed a sell signal in late January when the 14-month RSI of the NYSE Composite exhibited a negative divergence when the market made a new high, but RSI didn’t. Now it flashed a buy signal at...
As expected, the Federal Reserve left interest rates unchanged. The Fed Chair acknowledged a high degree of uncertainty about the effects of tariffs: “Ultimately the cost of the tariff has to be paid, and some of it will fall on the end consumer. We know that’s coming, and we just want to see a little...
In the wake of the tame May CPI report, the Trump Administration publicly pressured the Fed to cut rates on social media. CNBC reported that Trump called Powell a “numbskull” and he “may have to force something” if Powell doesn’t act.
I am reiterating my bullish view on gold. Gold staged an upside breakout through a cup-and-handle pattern at 2100 in early 2024 and hasn’t looked back since. Moreover, it has staged upside relative breakouts against both the S&P 500 and a 60/40 proxy and it has stayed above the relative breakout levels even after the...
Mid-week market update: The S&P 500 is stalling just below its 200 dma after becoming overbought on the 5-day RSI and the percentage of stocks above the 20 dma. What technical pattern is it tracing out? Is it a bull flag (shown by the red lines), or a bear flag (black lines). Bullishness...
Mid-week market update: Four weeks ago, I rhetorically asked in a post, "Who's Left to Buy?" The BoA monthly Global Fund Manager Survey had shown cash levels at a 15-year low. In addition, a Schwab survey of customer accounts showed cash at similarly historical lows. It was the case of an accident waiting to happen....
Mid-week market update: What happens when an ominously sounding Hindenburg Omen occurs when the market is oversold? David Keller described the three components of the Hindenburg Omen in an article: The market has to be in an established uptrend; Market breadth becomes highly bifurcated, as measured by the expansion of new highs and new lows;...
Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The Trend...
It has been over a week since the Fed’s decision to cut rates by a half-point, and that’s a decent interval to assess the market reaction. Investors should be aware of one crucial detail about market psychology. Even as the Fed offered a “commitment not to fall behind the curve” as a way of...
Mid-week market update: The Fed hates to surprise markets, but for the first time in a long time, market expectations of FOMC action was highly uncertain. Is the Fed going to cut by 25 or 50 bps? On the weekend, the majority expected a 25 bps cut, but by Monday, it had shifted to 50....
Mid-week market update: The market almost flashed a Zweig Breadth Thrust buy signal this week, though there is some dispute over the calculations. As a reminder, a ZBT buy signal is triggered when the market rises from oversold to overbought within 10 trading days. According to StockCharts, the market never reached the oversold condition on...
The U.S. economy is showing signs of weakness. The Citigroup Economic Surprise Index, which measures whether economic releases are beating or missing expectations, has been trending down. In addition, Chair Powell has more or less made it clear that a September rate cut is in the works, as long as the inflation data stays low....
Recent U.S. economic data has generally been weakening, as evidenced by the decline in the Citigroup Economic Surprise Index (ESI, gold line), which measures whether economic data is beating or missing expectations. As ESI has been roughly correlated to bond yields, this should put downward pressure on rates and expectations of rate cuts in the...
Remember that equity investors tend to enjoy strong returns in the absence of recession, which dents returns, or war and revolution, which can result in a permanent loss of capital. With those caveats in mind, the market gods are presenting patient investors with three gifts from the three economic blocs in the world: the U.S.,...
Mid-week market update: The option market was pricing in a daily equity market swing of 1.6% ahead of today's events, namely the May CPI report and the FOMC decision. Even though the S&P 500 gained strongly today, the move could be said to be disappointing in volatility terms. The bullish tone was set this...
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