Well, at least it’s all out in the open now. Nobody even bothers about growth or earning anymore (at least for now).
It’s all about the Fed, markets by central committee. Don’t take my word for it, just look at the headlines:
Dow Futures Drop Because the Fed Might Not Cut Rates After All https://t.co/4EjmBaxPG6— Barron's (@barronsonline) July 8, 2019
This @CNBC headline illustrates what is consensus expectation: Yes economic conditions are likely to will get harder but #investors can continue to rely on the power of #CentralBanks to drive asset prices higher --that is, an ever widening gap between fundamentals and valuations! pic.twitter.com/AV5wpdxxcm— Mohamed A. El-Erian (@elerianm) July 8, 2019
It’s just the extension of what we’ve seen all year:
…or since 2009 for that matter:
And for now the machines continue on their programmed mission to buy no matter what:
My current technical outlook remains the same as outlined in Sell Zone.
The Distortion continues.
But look closely, the market construct is fragile. It’s all a bunch of rising wedges, bear flags and open gaps.
Indeed rising wedges have been the hallmark of the market’s action for the past year and a half:
They’ll squeeze and squeeze until they eventually break.
And underneath the big 3 main indexes we have bear flags:
And in between all of these patterns we have an array of open gaps below:
And now a couple above. Markets of the gaps. Wedges, flags & gaps. Swell.
But don’t worry, the Fed has our back. Right? Right.
After all we have Jay Powell to look forward to this week, over and over again no less, 2 congressional testimonies and a speech plus dovish Fed minutes.
Who needs earnings and growth. Well maybe Deutsche Bank, the bank with the largest derivatives book on the planet.
18,000 being laid off. How’s that going? Well, you already know:
Maybe the Fed can keep the 3.6% unemployment fantasy going for a while. Maybe not.
Jay Powell will tell us this week that he can.
Last year he also told us he can raise rates this year.
* * *