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U.S. Aggregate T-Bond Market. Fears & Greed Awakening. Series IIIt's gone 3 weeks or so, since Mr. Trump has secured a win over his Democrat-rival Kamala Harris in the 2024 U.S. presidential election, as it declared by the Associated Press. Since that, a lot of stocks soared in a meme-style mode, while Bitcoin almost cleared $100,000 and Dogecoin soared amid Trump-fueled crypto rally. However macro data still stoke fears over a possible recession and the notion that the Federal Reserve could be too slow with cutting interest rates. Non-farm payroll added just 12K new places last month. And the ISM manufacturing index, a barometer of factory activity in the U.S., came in at 46.5%, worse than expected and a signal of economic contraction. Fresh ISM release is scheduled on Dec 02, 2024 (47.5 points forecasted), and labor market data is on the radars on Friday, Dec 06 (+183K non-farm payroll forecasted). The main technical graph is for U.S. Core Aggregate T-Bond Market ETF (AGG), in total return format, and it indicates on Reversed Head-and-Shoulders technical structure in development, as it's been discussed in earlier published ideas. Moreover, huge 200-Week SMA breakthrough is on the investments radars also. What does it mean for Bond Market?.. Potentially "Good", to jump to all-time high. ... and for Stock Market?.. Potentially "Also Good", until it reach the fever pitch.
AMEX:AGG
by Pandorra
Shelter Inflation. The Tail That Wags The DogInflation is finally cooling off as inflation gradually loosened its grip on Wall Street and the economy in 2023, raising hopes for a gentler Federal Reserve and further gains for the market in 2024. Stocks rallied to their best 9-weeks stripe over the past 20 years in November and December, 2023 (so-called 'Santa Rally') as investors raised their bets that the Fed is done hiking interest rates to fight inflation. 6Mo USCPI Inflation was at its lowest levels since Covid-19 pandemic in early 2023 Top 4 U.S. stock market Indices were in rally in 2023 The economy has cooled under the weight of rising interest rates, as the central bank intended, but remains surprisingly resilient. Energy prices are down. Food prices are mellowing out. But the cost of having a place to live is still rising much faster than just about every other essential. U.S. Consumer Price Index inflation Headline inflation was up 3.1% from a year ago, and so-called "core" inflation, which excludes volatile food and energy prices, was up 4%. But the cost of shelter, which is the biggest component of the basket of goods the BLS uses to measure the cost of living, was up 6.5%. "The shelter index was the largest factor in the monthly increase in the index for all items less food and energy," read the Bureau of Labor Statistics report accompanying the latest data on consumer prices. "The shelter index increased 6.5 percent over the last year, accounting for nearly 70 percent of the total increase." When the covid-19 pandemic hit, the cost of housing surged as those who could afford it sought out bigger homes and many city-dwellers transitioned to the suburbs. What goes into Consumer Price Index That and a glut of savings unhindered by low interest rates combined to exacerbate what had been a long-simmering Housing crisis the U.S. But now that baked-in price hikes and rising mortgage rates spurred by tightened Federal Reserve monetary policy have put a bit of a damper on things, the housing market is also starting to cool. U.S. Single Family Home Prices in "Bubble Mode" 30Yrs Fixed Mortgage Rate is at 20Yrs Highs. 30Yrs Mortgage Annual Payment U.S. Single Family Home, only Interest. Housing prices tend to be “much stickier” than most costs, which means that when they rise we feel it more - and for longer (read - "for ever"). Housing prices do not compressed like just baked iPhone or iMac later in few years of its release. - Does all af that mean that pre-covid levels of relative housing affordability are coming back? - Sure "No". But at least American wages, which are still rising faster than before the pandemic thanks to increased worker power, will have a little chance to make up some lost ground. The issue is still Federal Reserve' lagged tightening policy, that is "The Tail That Wags The Dog".
FRED:CUSR0000SAH1
by Pandorra
Stock Market vs Govt Bond Market. At the Dawn of ChangesIt's been 3 months or so since the late March quarter bullish exuberance took the stock market, Ethereum (ETHUSD), Bitcoin (BTCUSD), other crypto assets to their new 52-week and all-time highs. This is now changing, while the stock market and cryptocurrency markets have stopped making new highs, despite the fact that Roaring Kitty is once again deafening everyone with her phenomenal calls. Quite high inflation reports for the first quarter of 2024 became a kind of “cold shower” both for the market and for expectations of a possible reduction in interest rates, while the markets have been living this still unfulfilled dream for almost the last year and a half. The Federal Open Market Committee is unlikely to adjust rates at its upcoming next meeting on June 11-12. In any case, the prospect of any immediate rate adjustments is estimated at a modest 0.1 percent. It has been nearly a year since the FOMC last raised the federal funds rate to its current target range of 5.25% to 5.5% in July 2023. And while FOMC members have signaled that labor market weakness could force them to cut interest rates, the labor market remains broadly resilient and unemployment low. Fixed income markets are forecasting that September could be the first interest rate cut of the cycle. However, this is not certain as the estimated odds are currently around 50%. And again, these forecasts implied by the market can quickly adapt to economic news, and again - turn out to be unfulfilled dreams, just like the dreams of rate cuts that, as discussed above, markets have been living with for the last year and a half. The main technical chart is the ratio, between iShares Core S&P 500 ETF (IVV) that is similar to mostly known SPDR S&P 500 ETF TRUST (SPY) on the one hand, and Ishares 20+ Year Treasury Bond ETF (TLT) on the other hand. Both ETFs (IVV, TLT) were taken in "Total return" format. In technical terms, the graph indicates on Bullish upside channel, as right here we're near its upper line, exactly like 17 years ago in second quarter of 2007. Auxiliary RSI(14) chart indicates also that Stock/ Bond ratio is too overheated in favor to stocks. The idea should not be seen as a call for immediate action. However, it is wise to keep in mind that investing in stocks can seriously underperform Govt Bonds in the medium to long term.
AMEX:IVV
by Pandorra
Golden Doomsayer judgment is that inflation still highGold prices traded higher midafternoon on Wednesday as a report showed US inflation is still high. Gold for June delivery was last seen up, again near US$2,400 per ounce. The US Bureau of Labor Statistics on Wednesday reported the April consumer-price index rose by 0.3% from March. Shelter, gas prices remain sticky. Notable call-outs from the inflation print include the shelter index, which rose 5.5% on an unadjusted, annual basis, a slowdown from March. The Shelter index (the largest US CPI component with near 32% weight) rose 0.4% month over month and was the largest factor in the monthly increase in core prices, according to the BLS. Sticky shelter inflation is largely to blame for higher core inflation readings, according to economists. In technical terms, Gold prices are on positive path, firmly above 26- and 52-weeks SMA, while 50/200-weekly SMA Golden Cross that occurred in 2017, still works pretty well, helps year after year to robust gain in yellow metal. Technical perspectives are near 2550 and 2800 per XAUUSD ounce in this time.
OANDA:XAUUSD
by Pandorra
1
🎲 Interest Rates. To Cut, or not to Cut. That is the questionJamie Dimon Sees ‘Lot of Inflationary Forces in Front of Us’, as in recent interview to Bloomberg JPMorgan CEO has warned for months that rates could stay high. Jamie Dimon said he’s still more worried about inflation than markets appear to be. The JPMorgan Chase & Co. chief executive officer said significant price pressures continue to influence the US economy and may mean interest rates will be higher for longer than many investors are expecting. He cited costs linked to the green economy, re-militarization, infrastructure spending, trade disputes and large fiscal deficits. “There are a lot of inflationary forces in front of us,” Dimon said in an interview on Bloomberg Television Thursday. “The underlying inflation may not go away the way people expect it to.” The S&P 500 and Nasdaq 100 closed at record highs Wednesday amid optimism over monetary policy easing after a measure of underlying US inflation cooled in April for the first time in six months. Dimon said that markets have been healthy for a while, but that doesn’t necessarily predict the future. “If you have higher rates and — God forbid — stagflation, you will see stress in real estate and leveraged companies, and private credit,” Dimon said. “Stocks are very high, and I think the chance of inflation staying high or rates going up are higher than people think,” the CEO said. “My view is whatever the world is pricing in for a soft landing, I think it’s probably half of that. I think the chances of something going wrong are higher than people think.” The CEO has been warning for months that inflation could be stickier than many investors are predicting, and wrote in his annual letter to shareholders that his bank is prepared for interest rates ranging from 2% to 8% “or even more.” Dimon said that “a lot of happy talk” is why markets aren’t pricing these elements in. Even though a bigger surprise would be higher rates, Dimon said that geopolitics could create the “main stress that we’re worried about” amid the impact those dynamics have on oil and gas prices, trade and alliances. With war in Ukraine, the situation in the Middle East, tensions in North Korea and the use of nuclear blackmail, the geopolitical situation is “very tense,” he said. When it comes to China, the right thing for America is to “fully and deeply” engage, he said. Still, the fragile relationship between the two countries makes banking in the country — where Dimon said JPMorgan has roughly 1,500 multinational clients — a riskier prospect. “They’re not leaving China, so we’re going to serve our clients there, we’re just much more cognizant the risk is higher,” he said. “You look at China from a risk-reward basis, it used to be very good, it’s not so great any more.” Basel III The financial world has been in a heated debate over US proposals tied to what’s called the Basel III Endgame — an international regulatory overhaul initiated more than a decade ago in response to the financial crisis of 2008. US regulators have decided to adjust the original proposals following substantial backlash. Dimon reiterated his comments that the proposals are excessive. “I would love to know what the end game is,” Dimon said. “Regulators should answer the question: What do you want — How do you want the system to work?” Uncertainty pushes Gold prices (XAUUSD) more higher, later than The US Bureau of Labor Statistics on Wednesday reported the April consumer-price index rose by 0.3% from March. Shelter, gas prices remain sticky. Notable call-outs from the inflation print include the shelter index, which rose 5.5% on an unadjusted, annual basis, a slowdown from March. The Shelter index (the largest US CPI component with near 32% weight) rose 0.4% month over month and was the largest factor in the monthly increase in core prices, according to the BLS. Sticky shelter inflation that was one of the main reason of 2007-09 Financial crisis is largely to blame for higher core inflation readings, according to economists. The main technical graph is an inverted (normalized) chart for expected Federal funds rate at mid-March 2025, based on respective Mar'25 FedFunds Futures Contract (ZQH2025). Following the upside trend, as well as forming reversed Head-and-shoulders structure, the nearest target can be around 8 1/4 - 8 1/2 over the next 12 months. Historical backtest analyses says, this scenario is not a nonsense, as in early 1980s the difference between US 10-Year T-Bond rates and US Interest rate has been already hugely negative at similar market conditions (fighting against non-stop inflation). Let's see what is next in nowadays..
CBOT:ZQH2025
by Pandorra
Volmageddon. Please Buckle Up. The Plane Will Be Landing SoonStocks are vulnerable to a 5% 'air-pocket drawdown' as greedy traders short volatility. Tuesday's stock-market pullback on February, 13 after a hot inflation report actually showed us something else about the market. It turns out that it did… an overcrowded short side of the options market which was reminiscent of the 2018 and 2020 'Volmageddon' events. ProShares Short VIX Short-Term Futures ETF AMEX:SVXY graph says selling volatility is on the hot spot, like four and six years ago, in 2020 and 2018 respectively. The "Volmageddon" episode happened six years ago after traders piled into a bunch of ETFs that were designed to return the inverse of market volatility (essentially betting on a calm market). And when volatility went up in February 2018 and in February 2020, it tanked those strategies, sending the S&P 500 down more than 10% in two weeks. Investors appear to be taking risky bets again, specifically in VIX futures, which are assets that let investors bet on future volatility. As VIX futures expire, the S&P 500 is seeing stronger price reactions. Based on the magnitude of the move in VIX futures, there is an increasing threat that the rising level of greed in the 'short-volatility' trade, similar to what we saw in 2018 and in 2020, could result in an air-pocket drawdown of 5% or more in the S&P 500, to 4800 points respectively. The short-volatility trade became very popular strategy after 2010 when volatility was low, and traders could make money betting against market turbulence. The Cboe Volatility Index, which is also dubbed as the TVC:VIX or the market's "fear gauge," is sitting around 14, near historical lows. The rebound in interest in short-volatility strategies is once again posing a risk to the broader markets here as a negative catalyst can clearly spark a momentous, derivatives-driven selloff in the broader stock market like that which we saw in 2018 and in 2020. It's not a major concern right away as volatility upticks have been small, and the S&P 500 has remained resilient. The market shrugged off Tuesday's pullback quite fast. But it's worth keeping all your eyes on as all 2024 progress can be erased shortly. Going forward, these expirations will remain dates to keep in mind as the threat of volatility will be elevated as we move further into 2024. Technical graph for CBOE:SPX says we are still in the upside channel since Q4'22, near its upper line, with further perspective opportunities to erase 2024 gain, shrugging back to mid-line around 4800 points. Market breadth says also there're huge divergence in CBOE:SPX and in NASDAQ:NDX all the 2024, as 50-days indicators move firmly down all the year, while indices are still up so far.
FOREXCOM:SPX500
by Pandorra
4
🧽 Mister Poper. Meet The Cleaner Of Your DreamsCopper price continued to provide negative trades affected by the frequent stability below the additional barrier at 3.7280, to manage to reach some negative stations by touching 3.6100. Also, RSI stochastic continues to provide the negative momentum to allow us to suggest forming new negative waves to attack the additional support near 3.5000 followed by monitoring its behavior to manage to confirm the upcoming trend. The expected trend: Bearish
COMEX:HG1!Short
by Pandorra