Friday Chart Book
September FOMC is the highlight of everyone’s thoughts. Believe me when I say that in a few months, whether they go 25 or 50 will be totally inconsequential. It won’t be next week, though. Markets are revisiting the probability of a 50 bps rate cut on two curiously timed articles (with the addition of Dudley). Roughly 34 bps is priced in for September. Two articles late Thursday stressed it was a close call between 25 and 50 aftermarket consensus had coalesced on the former. Former NY Fed President Dudley gave his two cents, too, after opining, “I think there’s a strong case for 50.” Coincidence or tactical, BoJ-esque manoeuvre?
“Is this the real life, or is this just fantasy?” mark the famous lyrics of Queen’s Bohemian Rhapsody. I think we are currently living in a bit of a fantasy. While I see the urge of the Fed to adjust rates to normal, I just don’t see any economic urge to start off with a 50 bps cut to start the cycle. I also think this would potentially send wrong signals and has a bit of a political aftertaste, given the current macro trajectory. I might be wrong, and the Fed wants a bit more insurance to support a somewhat weakening labour market. Am I forgetting that rates are north of 5% and not 2%? Sure, levels matter, but similarly, the economy has still been fairly well-off under those conditions, and the Fed members themselves should also be surprised by this fact. Returning to neutral, if it’s a set policy target, will certainly take a fast elevator approach down mode. But this is already priced.
Gold is back at all-time highs, and I have flagged the positive momentum in the regular chart updates. What does it tell you? Is it more about politics, geopolitics and then some reignited potential over-easing by the Fed? It certainly has a lot of good things going for it. As I have opined before, I see Gold as a forward on liquidity conditions. As such, the price action is telling us that things are potentially getting too easy, which is also the reason why risk assets have bounced hard during the week. I have warned that this is a market condition that will rob pockets of bulls and bears. Staying the course and being nimble is the right thing to do.
One chart to contemplate as we move into next week is the US 10-year (TN) future. The momentum and reversal models whisper to us what’s possible and how risk-reward is skewed. For those unfamiliar with the charts, the green markers point to buying mode as far as the momentum signal is concerned, and we have been riding the trend since early July. The green and red triangles marker reversal patterns of the underlying trend, and we are currently in a zone where reversals are expected to occur. On top of that, we have a candle counting system, which currently stands on count 8. Typically, 9-13 counts signify reversal patterns. This could come as early as next week. You will have a way more comprehensive view of all 250 charts below, but what the below is whispering to me is: “Don’t be stupid, they won’t do 50, don’t be overly long Treasuries at this stage.” We shall see.
By now, most of you will be familiar with the models and their signals. If not, please study the guide I have published. I would highly recommend you go through these notes and guides if you are new to the pack.
Further below, the full book of 250+ charts covers the whole asset spectrum from equities, bonds, commodities, FX, and Crypto to give you the most extensive view. On average, it will generally provide a good 5-10 set-ups on a weekly basis.
A reminder that you can now also use my models in TradingView scripts, which I made available for subscribers to use on their charts for a fee. If you are interested, ping me an email with your TV username. Note that only paying subscribers will be granted access. No exceptions.
Let’s also read my friend Macro D’s recent thoughts on markets before engaging our scanning eyes across the multitude of charts that I have updated for you below.