Good afternoon. I hope this short note finds you well and staying warm. I ALSO hope that it finds you having sold 10yy against 200dMA (3.367%) …
If so, yer brilliant AND should likely play Powerball before this evenings drawing?
Look, the fact of the matter IS that with refunding coming up this week, a bit of a breather — ie CONCESSION — cannot be considered a bad thing NOR a surprise as the bond market (10yy above, for example) sees momentum moderate from overBOUGHT to less so. Should this continue, who knows, maybe they’ll ultimately look CHEAP … For me to say WHEN that might be, well, likely better chance of me hitting Powerball …
Ok, maybe the odds aren’t as stacked against you (with 10yy as opposed to Powerball)! But hey, how about that NFP beat … ZH has some of what was behind it all and for more … much, much more,
HERE are a few observations from Global Wall Street’s narrative creation machine. Mostly it is a NFP recap and victory lap while nobody really ‘told us so’ — evidenced by the 8-sigma BEAT relative TO the CONsensus — ZH:
… The Big Picture: spread US IG BBB bond yield vs T-bills lowest (60bps) since Jan'81...so rare & such “greed” (1929, '66, 73, '79, '07 – Chart 2) preceded tops & crashes; we are bullish bonds H1’23 but once recession starts, yield curve steepens, and only if credit (homebuilders, semis, banks) continues to rally can we be sure bull has begun, landing soft.
Hmm. Ok then. Some pre TOPS and CRASHES food for thought, then. You’ll find this and MUCH much more on this weekends PDF.
From Global Wall Street TO a few other observations, things and links to consider as you plan your trades and trade your plans…
The Fed Fights the Fed - Policy makers want to convince investors that smaller rate increases won’t presage cuts
The Federal Reserve’s message to investors: Trust us, this time will be different…
… What the Fed actually does will depend on what happens with inflation and employment in the months ahead, so it is understandable that it is reluctant to throw in the towel just yet to investors on rates. But there is also a danger that investors increasingly see any hawkish talk from the central bank as mere jawboning, and think the Fed itself doesn’t believe the things it is saying.
Any and all thoughts — welcomed. By Justin … not me. K, thanks.
Moving on to another fan favorite — Greg IP who details everyone’s favorite — the game of ‘Debt-Ceiling Chicken’ again from the WSJ (also from Feb 1)
How to Play ‘Debt-Ceiling Chicken’ - Republicans will be emboldened to push past deadline, but history shows politics are against them
… If Treasury can’t redeem principal or pay interest on time, that would constitute a technical default, said Blake Gwinn, head of U.S. rates strategy at RBC Capital Markets. That is less serious than a true default such as Mexico’s in 1982 or Lehman Brothers’ in 2008. No one doubts that the U.S. Treasury will, before long, pay everyone back 100 cents on the dollar.
Even so, the financial system’s legal, technical and procedural systems aren’t designed to deal with such an event, and some investors with no tolerance for risk will avoid Treasurys, pushing up interest rates. Given how central Treasury securities are to highly interconnected global financial markets, the risk of a financial crisis cannot be dismissed. Markets naturally assume Treasury and the Fed would break all sorts of precedents to avoid that, as they did in the financial crisis of 2007-09 and the pandemic of 2020 …
… long-time followers of EPB Macro Research know that focusing on the cyclical trend in growth is where we find the most valuable information. After all the data revisions, total employment growth declined to 4.5% in January from 4.6% in December and 4.7% in November. Job growth is now reported to be slightly lower than the newly revised summer dip, but still 1.6% slower than the peak recorded in April 2021.
Prior to the revisions, the cyclical peak in employment growth was in April 2021, and after the revisions, the peak remained in April. The trend of slowing employment growth was completely unaltered by the revisions, which is why it remains critical to focus on the 6-12 month trending direction in growth rather than pay any mind to the monthly gyrations in highly volatile and heavily revised high-frequency economic data…
And Eric’s Chart of the Week,
The coincident index of employment, which contains five variables, surged higher in January to the highest monthly growth rate since last February. All five components showed an increase in January…This data increases the chances the Fed raises rates again in March, but it doesn’t do anything to change the forward economic outlook. The economic outlook cannot be changed by coincident data to begin with, and usually, it starts with leading indicators, but as of right now, this report should be taken as a strong monthly gain within an otherwise decelerating labor market trend and a pre-recessionary or early-recessionary broader economy.
For our collective inner technical chart followers,
… As shown below, the S&P 500 developed a downtrend starting in January 2022. The connecting series of lower highs acted as a dynamic resistance area throughout last year. After several failed breakouts and a bear market drawdown, the S&P 500 finally broke above its downtrend in January. Furthermore, the index also cleared the December highs at 4,100 this week, suggesting a new uptrend is now underway.
While trendlines can vary and sometimes be subjective, especially when utilized across different timeframes, moving averages provide an objective perspective on trend direction. As a backdrop, a simple moving average is calculated by taking the arithmetic mean of a security’s price over a specific number of lookback days. For equity markets, the most common moving averages used are the 50-day moving average (dma) and 200-dma. When price is above a long-term moving average, such as the 200-dma, the security is generally considered in an uptrend, and vice versa if price is below the long-term moving average…
… In summary, the recent golden cross adds to the growing technical evidence of a trend change for the S&P 500 and further raises the probabilities of the bear market low being set in October. While the current pace of the rally is unstainable, the change in direction from last year’s downtrend appears durable.
A couple CHARTS from the intertubes over the weeks recently past which I didn’t want to let slip by without at least mention … perhaps even MORE relevant now, in the fullness of time and with payroll employment shocking the front end of the yield curve, still developing …
McClellan: Eurodollar COT Model Calls for July 2023 Top For Short Term Rates
KIMBLE: Short-Term Government Bonds Suggesting Fed Funds Peak, Says Joe Friday
Moving on then TO the week ahead AND for any / all (still)interested in trying to plan your trades and trade your plans in / around FUNduhMENTALs, here are a couple economic calendars and LINKS I used when I was closer to and IN ‘the game’.
First, this from the best in the strategy biz is a LINKthru TO this calendar,
Finally, ahead of NEXT weekends festivities a bit of good news as preparations ‘round these parts starting to kick up into higher gear … menu is not yet set in stone but,
ZH: Americans Hosting Super Bowl Parties Breathe A Sigh Of Relief After Chicken Wing, Avocado Prices Drop
THAT is all for now. Enjoy whatever is left of YOUR weekend as I’m still soaking in all the turns of events here…
