by Rasool Cunningham
Philadelphia, PA (DYDD)
$TF_f’s price will tell us a lot about this market as a whole. If its price get’s below these levels it reaffirms the markets intentions to go down. But before we get to the chart, let me ask that when you look at this chart don’t just see bars and numbers and lines. Try to see people — acting in what they think is in their best interest. Whether these people are right or wrong doesn’t matter. The fact that they’re acting this way speaks volumes. A lot of times the market sees what we don’t see. I don’t know, but these levels look key to me because If price breaks below these levels it says the Fed made a mistake. But first, the levels, then; why I say it says the Fed muffed a rate hike. Here’s a few $TF_f charts:
If this happens, it would say the Fed may have made a mistake by not hiking. If price can break below recent lows It’s risk off like shit.
This is what you were trying to avoid, right? Let me guess, it would have been worse?
But everyone says twenty five basis points don’t matter. The econ textbooks say you shouldn’t hike in this environment, but they also use the phrase “all things being equal” a lot when all things are never equal in the real world. It’s rare that the price of any given thing is equal.
All things are definitely not equal right now. The Fed took some pressure off emerging markets, but it’s unsustainable. They must go through the pain sooner or later. We always choose later, but when “later” arrives we want a even later “later.” Ha, that’s funny because looking at GBP/USD and EUR/USD’s price action it seems like had the Fed hiked it would have tanked both of them making buying U.S. assets a must; reigniting the Euro carry trade. It may not have made stocks go gangbusters to the upside, but it would have put some buying pressure under stocks. This way there’s no reason to buy U.S. stocks right now right here.
I understand the Fed doesn’t want to pull the trigger too soon, but it will always be too soon to for a bunch economies around the world. Why did we do all those stress tests? I get that the Fed Funds rate futures pricing in a 30% chance of a Fed hike means 30% of that (huge ass) market is ready for a rate hike. That means 70% of the market would feel pain if the Fed hiked. But I don’t believe the market believes the Fed will ever hike. Maybe over lunch between Fed officials and bankers they’ll give them the heads up that they’re about to hike and the Fed Funds futures market will price in a hike, I don’t know.
It is easy for me to say the Fed should have hiked, I’m not the one who would be in the hot seat if that 70% in pain does something irrational (with so high a percentage that’s a given) which leads to some unforeseen event. But the Fed’s obsession with inflation is blinding it from seeing the bigger picture. By waiting they only guarantee that when things are better their rate hike will dampen growth then. They’re in their own matrix. A world they created where the can’t reach their targets because of what they promise will happen once those targets are reached.
The future looks darker because the Fed will have to raise rates one day — in the future. Low interest rates equal low returns after a while. Bill Gross added onto what Ray Dalio said on Bloomberg T.V. It amounted to: Rates must rise in order for returns to rise in the future. The longer you wait the farther into the future you push the recovery from the normalization process itself. You could argue all the worlds problems are attributable to the Fed’s normalization of policy. China’s problems look like a lagged effect of the end of Qe. I don’t know. I do know the price of $TF_f needs to hold the 1140’s or 1100 is on deck. a break of 1100 gives a 1080 target. A break of 1080 gives us a 1040 – 1041 target. If 1041 can’t hold 1126 is on deck. a lot of “if’s” but let’s just call it “data dependent.” analysis. Ha! Thanks for reading, hope this helps some one,and happy hunting this week traders!
- Feature pic cred: http://www.goodreads.com/quotes/tag/timing