The Market Was Way Too One-Sided
It’s Fed Day! Here’s What I’m Watching
The Market Was Too One-Sided
Brace For Impact After The Bounce
It’s Fed Day! Here’s What I’m Watching
I wrote the post below on the last Fed Day June 17th.
WATCH THE DOLLAR still stands as #1 warning to equity & bond bulls. Rising USD is a liquidity vacuum & policies dictate price.
Watch Fed Liquidity is squarely my focus now. (Yes, I have an indicator for that I share with LaDucTrading members daily.)
Warsh wants a smaller Fed balance sheet but needs the ballast of his “AI is going to make everything cost less” productivity mantra to offset the drain, or we will have big volatility.
Watch Inflation Expectations. Conditions for a ‘normative’ Fed Rate Hike are debatable. Best argument: wars are inflationary and Warsh has a ‘credibility hubris’ to overcome. But he is an inflation hawk in sheep’s clothing.
Here’s what I mean:
Hiking rates ahead of tomorrow’s PCE index & prices (expected to fall from 4.1% to 3.7% YoY) doesn’t make a whole lotta sense.
Also, hiking to tighten an economy he is mandated to support, undermining Treasury’s job of financing govt largesse, sets up a case of ‘the medicine is worse than the disease’.
Besides, US is clearly in a regime of fiscal dominance when yields stay bid anyway on govt fiscal malfeasance and grift disguised as ‘Industrial Renaissance’.
So it will be important to watch closely what he says, if anything, about actual Fed balance sheet policy moving forward - since Warsh removed guidance on rate policy. And given he spent a year selling his policy views to shrink the Fed balance sheet, I think that is the more important tell for that will tighten the money flow that has inflated risk assets the most.
So watch the dollar this week more closely than usual, for it will let us know immediately what is in store even if Warsh doesn’t. 😉
The Market Was Too One-Sided
Dispersion since the Nasdaq’s peak on June 2 has been dramatic.
And JUNE 2nd is EXACTLY when I warned in my client post of DISPERSION UNWIND!
Want proof how dramatic? Goldman's high beta momentum basket shows worst monthly performance in history - even worse than 2000 or 2009! How is that for timing?
And my daily reviews of “NOT IF BUT WHEN” lower levels for all our LaDucTrading members short has proven very profitable.
So now what? This Wednesday-Friday window will be intense.
