Alright guys lets just jump right in and first talk about the FOMC decision for rates, they were left unchanged as widely expected this week. One thing that we did want to note is that Jerome Powell at the pressor just seemed a bit awkward and unsettled. He doesn’t have a good poker face and we know why he is a bit wavered, its because he knows no matter what the data may look like, he will have to cut rates. We keep hearing this stagflation term and its really not that. We continue to have the mega Covid stimulus overhang which brought forth decades worth of realized monetary stimulus in just a year or twos time. This has the real effect of distorting natural economic processes, but more importantly it provides the back drop for a very massive cash hoarding potential by a very small subset of the population.
Yes at first it seems grandiose and economic data picks up, but then that short term pop leads to all that capital being funneled to the top 5% of the population, all the while distorting the pure and natural normal economic signaling for resources, production and distribution. We are now starting to see things normalize and with prices remaining higher for longer, just like interest rates, this devastates the majority of the populations balance sheets and the majority are unable to sustain current lifestyles. This is why we see employment remain high and stable, because underneath many work two jobs just to afford the soaring costs of food, rent, shelter, health and insurance as well as energy.
So this leads us to today where we are awaiting the Non Farm Payrolls report which is expected at 240k. We know we have to take the BLS data for what it is for face value, but we also know it paints a picture of better than reality. However are we about to see a change in this sentiment? We know JPowell and Co. need a reason to cut rates sooner rather than later and we believe the payroll report will provide this reasoning. Once we get that negative payroll print, well the door is open for the FOMC to cut rates, which we know they drastically need to do, but they need to do it without the perception to the masses initially in stoking any further inflation thoughts!
Alright let’s move over to Apple which posted better than revised down estimates, but that wasn’t the big deal, the big deal was the $110bn announced buyback and why not, when your innovation is dead and you have a cash pile, buy your stock, we do think its the right course of action but we also think Apple in the long run is dead without some innovation and or acquisition and buybacks are their only real source of equity price appreciation it seems. Anyway post market activity has the stock up near $83 above our $181 line in the sand for now:
However we took a peek at the options for expiry today and we bet the market makers would love to see pressure down to $175 by the close because there are a lot of calls above this strike:
So let’s see how the day washes out and if Apple is able to hold onto the gains or not! We say Charlie Bilello post this great short and concise take on Apple yesterday on X:
When we look at the Nasdaq futures we can see that we are still below our 17850 area and this weeks close is important as usual and bulls will try to get a close above here, but it all really depends on NFP today:
Ok let’s take a quick look at the past few day’s settlement sheet where the US yield curves are supported by the front end of the bond market, equities have clawed back some of the recent losses, FX is a bit stronger over the past few days, with energies still weaker and metals mixed:
As far as the Magnelibra Futures Model Tracker, we do not have any changes to update but it was good to see its first positive month close:
As far as the MEGA8s Tracker here is the updated data, the tracker is flat this weeks hedge as of yesterday and we will target another hedge for next week on Monday as our sentiment is still negative this group for now:
When we look at the grouping on the charts it is sitting right on the first point of resistance but above our 2775 level for now:
As far as the groupings market caps vs their ATHs:
Ok let’s take a quick look at the US bond markets. They are telling us that rates are a bit too high here and those that needed to sell have done so as post FOMC has seen the yield curve supported with the 2Y the big winner yesterday:
The overall curve picture should be obvious, the yield curves have based out and our next progression will be a spike higher we believe:
As far as the US govt 10Ythe rejection from 4.75% is huge and suggests lower yields ahead:
Ok that is it for now, we hope you continue the journey with us and we hope you are learning from the data and the way we present it. Please share our work with anyone you know that may be interested in understanding our monetary system, our markets and how they function, or in general just want to perhaps get a better look under the hood of what’s moving the markets that we all follow! Cheers