Too Hot To Touch
Too Hot To Touch
Impressive run with 7 green closes in a row for SPX daily and 8 for QQQ!! This is extremely rare, as is the 7th largest VIX dump last week in all of VIX history.
And yet, here I am still seeing this as a bear market rally - as hopefully explained from my Intermarket Analysis review this morning.
And as such, and as I posted under #chase-ideas today:
SPX update:
Best guess - because we are so extended: Failed breakout on SPX over 4401 (438.43 SPY) in next few days... THEN selling starting on November 10th.
Macro event risks this week are these:
We have Powell speaking twice this week and Treasury auctions to better track demand and reaction to my USD/10Y ratio which moves equities and bonds:
$48 billion of 3-year notes on Nov. 7
$41 billion of 10-year notes on Nov. 8
$75 billion of 30-year bonds on Nov. 9
UST supply is much more relevant to dollar and 10Y than Fed-head talk, and Fiscal financing trumps anything Fed does or Powell says.
Basically. my whole mantra of FISCAL OVER FED
Speaking of which, as James Lavish highlighted today:
We are now paying over $1 trillion annually of *interest* on federal debt.
That's more than every single other line item (including Defense spending) except Social Security.
Swing Updates
I'm sure you didn't miss the fact that commodities were dumped today as growth got chased. As I have noted, FED RATE CUT EXPECTATIONS ARE SURGING.
I have also noted: Rate hikes are inflationary. Rate cuts are 'deflationary'. meaning they imply economy is or will weaken.
So economically cyclical stocks are really starting to show their underperformance. In particular, materials, energy and industrial stocks have sold off. Crude alone fell 6% today and 16% since I recommended short. I covered my XLE short today as it hit my swing price target perfectly at $83.69 from $91. During the same swing trade, I mentioned XHB should bounce from $69 to $75 - that's done - and IWM should bounce from $163 to $175. That's done.
I'm really waiting for the next best trade - in either direction - as the Flows take over Macro, for now.
“Treasury Default Playbook”
We have a US government shutdown risk that grows for Nov 17th. And yes, I ran across a random find wherein the Treasury actually has a "Default Playbook" to make shutdowns a moot point.
Because surprise: They backstop everyone!
This may be from 2011, but there is no doubt the game is the same.
“It means regardless of default, you know you can sell the security to the Fed (or pledge it as collateral for a loan) and thus know you can get "full value" for it so the lack of payments does not have much impact on the value of the securities.” @NathanTankus
Forget the “Powell Put”! We are talking “Yellen Yahtzee!!”
FISCAL OVER FED
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