Powell, LEI and Nasdaq
Powell continued his congressional speeches and he has made it very clear that the only path to reduce inflation is by raising interest rates, and, while that can be painful, it gradually slows down demand so that supply and demand can be aligned. - Well this is where Magnelibra disagrees because he obviously is avoiding the massive $8.4T elephant in the room, gee we wonder why?
He also touched upon talks of increased bank capital requirements and the impact this might have on the price and availability of credit. He said it would not have an immediate impact on credit availability and would be geared toward only the largest banks…obviously this would an attempt to sterilize any future QE so that the banks cannot lend, which makes sense, but doesn’t solve the real problem that bailing everyone out causes…too much money!
The Nasdaq has reached the 15160/180 area again on this mornings run up and this is the area we saw the algo start to really accelerate the sales yesterday, lets see how it reacts today, so far first time up has held:
With this run up this morning we would suspect further hedges for the equity downside to be put on by the longer term crowd. The US yield curve is seeing the very front end weaker on the day with the long end 30Y weaker to the Ultra long bond a theme which we have seen over the last 2 weeks for sure. A pretty broad based parallel bp shift in yields which seems to believe the 2Y needs to trade up to 5% again before we see real buyers:
We had LEI this morning and it continues to tumble, so we know the future prospects for a hard landing are here and we know the FRB is trying desperately not to let its foot off the gas, but they eventually will break the capital leverage in the system. LEI is weak because the consumer is weak, yet we know the non zero sum, never have to sell are barely seeing any change in habits, so its a game of tug of war, but LEI is painting the real picture:
Finally we wanted to toss in the Crude Oil chart, its followed our downward path which has been in place since last July. The Vwaps are providing formidable resistance as is this descending channel, so the trend is clear. We suspect continued selling on any pops in this market as Oil prepares for the global slowdown that is coming:
Ok guys over and out, good luck today remember we are trying to improve your analysis of the global markets, how we look at them may not necessarily be how you look at them because we all have different opinions and various exogenous occurrences that have impacted the way we view things. We understand this and we want you to know that we understand this. The objective is to present a view and then for you to absorb it, contemplate it, then implement your own view and formulate your own strategy. We all have different risk tolerances, different capital constraints, different time frames but all in all the general goal is the same, that is to generate above and beyond expected marginal returns! Till next time…
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