In a state of denial, the June rally that never should've been.

Despite such promising (sorry I mean "beautiful") past rhetoric from Trump on the trade war, he finally admits to the public there is no end in sight. I suspect the trade war will be with us for the foreseeable future, a deal might never materialize. A hard and painful reconfiguration of US supply chains away from China will likely intensify. Despite clearing a point of control that went untested for days, I'm not sure we have a clear signal to short yet since this rally extension (the best June in years) past 3000 was based on the expectations of rate cuts from the fed. Econ data today continues to show a net positive here in the US, an impressive beat on retail sales the highlight of the lot. This seems to compliment last week's inflation data finally ticking up. I find it personally absurd we're talking about cuts at ATH's but with the trade war still looming I think the slowdown in global growth will continue to play a major role on weather we get rate cuts at the end of the month. I'm expecting market participants to be disappointed no matter what happens at the fed meeting. The equity and bond market are pricing in over 50bs of cuts, but the dot plot suggests a majority vote on cuts that big will be hard to get. A cut below 50bps will likely not be enough to satisfy "investors" and I predict a sell off would occur. If we get 50bps I still think it would be a sell the news event. If the dot plot shifted that hard it would suggest the fed is very nervous about market conditions. Fears of a slowdown or recession in the US would likely grow. If we get no cuts at all the rate cut bulls (oxymoron of the year) will obviously throw a tantrum and a sell off would ensue. Because the market is bullish on cuts I think the negative commentary on the trade war could move us back into the 3012-3020 range by the EOW, potentially staying near ATH's until the Fed announcement. Bad news is good news, good news is bad news (pre market we dropped on positive data dump) Bonds have been moving in parallel with equities for weeks now, or is it the other way around? At this point I couldn't tell you what was up and what was down. This market is fucking bananas. nanas!

Agree? Disagree? Let me know what you are thinking!

Comment:

one note: if the fed cuts but below 50bps we might still get bullish action if Powell forecasts future cuts down the road. food for thought

Comment:

Completely forgot to mention the impact of q2 earnings that have started to come out this week! While bad data has been trading as good news on the indices don't expect that to fly on individual tickers. Some of the big banks have already reported and while departments like credit/debit cards are showing growth the forecast for earnings going forward haven't been great with the posibilty of losing interest on borrowing. We could see other sectors post weaker guidance or even miss EPS q2 due to the negative impacts of the trade war. This would likely increase the volatility on the indices. I think the Nasdaq in particular looks vulnerable on multiple fronts.

Comment:

Looks like reality is starting to catch up with the market. Bonds and equities were trading inversely today so its nice to see normal correlation again. Didn't get in on a swing short as I was biased long due to the last month of gains going against logic. My plan was to play the scalps, got in long shortly after cash open and got stopped out hard. I respected the short side for the rest of day. CSX missed earnings expectations and posted weaker guidance on trade. Crude dropped again, Bond yields still inverted. We are still priced in on a decent amount of rate cut at this price IMO, might finally be time where bad news is just bad news. Fine by me!

Comment:

And just like that we're back into 3000. This reversal came after an interview with a member of the fed. He aired his belief a definitive cut should be implemented before negative market conditions arrive in the data. This tells me there are fed members who are worried about the impact of the trade wars and global growth. Context around rate expectations have has changed. The odds/sentiment of a 50bps cut are on the rise and the market is moving closer to the highs as it "re-prices" this development. Earnings continue to be mixed. Netflix was a huge miss, Microsoft exceed expectations. Things will get more interesting when the manufacturing and industrial sectors report towards the end the q2 ER season.