PRE MARKET

CRM buying DATA…software names that were breaking down last Monday…that ramped on the 2nd Powell, up strong on the news. Fake meat companies soaring on losses…but strong sales. UTX buying RTN. No Mexico tariffs…duh…we told you it would not happen.

Bearish markets used to take time turning…no longer as again, the Fed could not even stand a 7-10% correction before changing their tune. And…the market’s default setting is to just buy it all. It happened in December…and it is happening now.

There is a reason India just lowered rates. There is a reason Australia just lowered rates. There is a reason China just added another $70 billion after adding almost a $trillion to its system. There is a reason Europe just announced they may lower rates even though rates are negative…and also said they could print more money. AND NOW…there is a reason why our Fed cannot even stand a 7-10% correction. The answer: debt and leverage. There is so much debt and leverage in the system that they know what happens if they lose markets. Keep in mind, it is these central banks that enabled all of it and Wall Street that forgot everything about 07-08.

So enjoy. Markets are beyond overbought and frothy in just days off a low.

THE FED/MARKETS

–We promised ourselves years ago that we would try to see the world. We have been everywhere around the globe. But we must tell you one of the places we were moved most was Normandy where they are currently signifying the 75th anniversary of D Day. Go there. Get there. It is an easy train ride from Paris. Walk on the beaches. See the bombed out bunkers. Visit the American Cemetery. See the history. Feel the history. You will not feel the same when your visit is done.–
–Well, this time it only took a 7% drop in the S&P for the fed to go from “being patient” to “cut rates” time.–
–We just wanted to repeat a few things and we should be done for the week. On December 19, 2018, the fed raised rates for the last time to 2.5%. Within a week, with markets swooning, the trial balloons started. Rumor of the fed changing their stance started to hit the tape. Markets stopped the swoon the day after Christmas. And then on January 4th, it was no longer rumor. All of a sudden, Powell went from raising rates 4 times in 2019 to “we can now be patient!” Markets did not look back until the end of April.–
–Fast forward to yesterday. Again, after a 7% drop, Powell and the fed now pivot from “being patient” to “cut rates” time. We told you this would happen because this has been their modus operandi since the lows of 09.–
–We are asked if whether the Fed can have so much sway over markets. You need not ask. Just look at their moves of the past 10 years. We came off our bearish stance on January 4th for one reason…. Powell’s change of stance. We told you yesterday we thought A low was now put in. There was only one reason for this…another Powell pivot to easier. But this time, we have something else to watch. Watch that 10 year yield. What is it telegraphing? Is it just the proposed tariffs or is it something else? If it is something else, that A low will not be THE low. Either way, we expect rate cuts to start this month or next and will continue to pay close attention.–
–And lastly, there is no way, no shape, no form that President Trump ever takes tariffs to 25% on Mexico. He knows and they all know there is too much at risk if they go that far. Expect a walk back of the rhetoric sooner rather than later.–

MARKETS DOWN…POWELL BLINKS AGAIN

–Back in December, in the depths of the market nausea, we started to hear trial balloons that the Fed was changing their stance. They were raising rates and their talk was of raising a few times in 2019. We stayed bearish all the way down for obvious reasons. And then, it happened. Live on tv, Powell did his 180…which got us to change our bearish stance while we were on live tv. It is usually something we see that changes our stance but in Powell’s case, this was about what we heard. Markets hardly looked back…all the way into late April. This has been the market’s modus operandi since the “Bernanke put.”–
–The talk out of the Fed has been “we will be patient!” Of course they could be patient. Markets were cooperating. Remember what we have told you. It is not about the economy. It is about the markets. And then…the old fly in the ointment.–
–Even with very low rates, even with negative rates in Europe and Japan, even with China continuing to ease, the economy here started to slow down. The 10 year yield did a cliff dive. The stock market started to correct. What happens? Like good easy money dolts, there goes the patience. We told you weeks in advance. Every time markets get in trouble, the fed floats an easy money trial balloon. If that doesn’t work, they come out with “not by accident” rhetoric of easy money. If that doesn’t work…then here comes the easy money.–
–But this time, it is not just easy money rhetoric. On top of Bullard’s easy money rhetoric yesterday, Jay Powell actually hinted this morning that both QE and 0% rates and even negative rates could be on deck with “perhaps it is time to retire the term “unconventional” when referring to tools that were used in the crisis. We know that tools like these are likely to be needed in some form in the future.” In other words, what used to be unconventional will become conventional. He then went on to state “the next time policy rates hit the lower bound-and there will be a next time-it will not be a surprise!” Jay Powell just told the markets that they had their back again. Easier money is coming and coming soon.–
–He then went on to blah blah blah about the economy, about trade and all that crap but the bottom line, Powell and the rest of the Fed continue to show it is all about the markets as they know they cannot lose the asset bubble they have all created because that would take away their all-important wealth effect.–
–AND THE MARKETS, like a behaving puppy dog, jumped quite nicely off of the oversold conditions we told you about yesterday. The last time the Fed did their 180, we came off our bearish stance but that was off a much bigger drop. This time, it only took a whopping 7% drop in the S&P to get the fed quivering. We will just say we think A low has been put in again and will let more cards come out of the deck. We still have to deal with what the 10 and 30 year yields are saying as well as the tariff addiction by the president. You should be way past calling them tactics as the president even wanted to go after Australia.–

PRE MARKET

Somewhat of a mega-cap tech slaughter yesterday off of potential investigations. They got the FB, AMZN, GOOGL but also got all the leading software names…where a bunch are no longer leading.

Of course, an “on purpose” word of easy money by Fedhead Bullard stanched some of the bleeding. If nothing changes, we expect a rate cut as soon as this month’s meeting but more likely the end of July.

Things gapping up today off of very oversold conditions. Keep in mind, all major indices are BELOW the 200 day average here.

GOLD and GOLD STOCKS are emerging again. We shall see if it lasts. This asset class has teased before to no avail.

Interest rates are the big story as the 10 year closed at 2.081 and the 30 year amazingly down at 2.548. Yields are very oversold. If yields bounce up, expect financials to bounce up.

Bulls would rather have the market open down and then rally but will take anything this second. Remember, throughout all corrections, the fed comes to the rescue. Looks like they telegraphed it again yesterday. Every time they have made a move, it has helped markets.

 

 

LAST WEEK/LAST MONTH

Last week, yuck. Last month, yuck.

The only thing emerging right now is GOLD and GOLD STOCKS as they came up the right side on heavy volume Friday.

Markets are deeply oversold but oversold can become more oversold. Of course, we also have to deal with the next tweet and maybe the next tariff. The latest…he president was about to apply tariffs to Australia.

We do not rationalize. We deal in price and with major indices below the 200 day average, not a good thing.

Go slow. Need to see some accumulation first…and right now, ain’t happening.