Market Journal: I Would…
Discussion
…Short this pre-RTH spike in equities as discussed last night via Twitter. Long end rates have stabilized and 2s are back above 490. The set-up is in place now for Goldman’s 250k NFP projection to rug-pull the market.
It’s clear from how stocks are trading and the sentiment around earnings season is a disbelief that this move in rates is serious. Many believe the Fed/Treasury will step in (see Michael Howell below) to halt the rise, either preemptively or in response to a crisis. But I believe this move in rates is beyond their ability to control until they deploy some form of QE, so until a crisis hits they won’t be able to act.
I like the 1987 playbook discussed yesterday. Multiple tests of that 100dma level while rates work their way up to unsustainably high levels. First up: The 50dma circa SPX 4400 ahead of August 10 CPI.
Exhibits
Equities strong pre-RTH despite long end rates stabilizing and 2s back up over 490, likely in anticipation of a strong NFP.
Michael Howell is beating the YCC drum hard and consistently.
