26 replies to this topic

[pedro]

First, Powell didn't cave ... he just got more specific ....

 

rates “remain just below the broad range of estimates of the level that would be neutral for the economy.”

 

just below the BROAD range, my emphasis

 

to me suggests well below the middle of that range

and even further below the upper end of that range

 

so rates are STILL BELOW levels that even the LEAST aggressive hiking of rates that Fed doves would support

 

Second ...  USA is the world's largest consumer market.   ROW exporters including China take US wholesale prices as given, and accept whatever prices they can receive, as long as they can make the sale.   They do not surrender market share over price.

Which means Chinese exporters eat the tariffs (as lower profits).     Landed US import prices (inclusive of duties) probably haven't changed much.     Chinese share prices have.

Edited by pedro, 29 November 2018 - 09:27 AM.

[dTraderB]

The takeaway for market participants is that the Fed chair made a purposeful, verbal detour from the "long way from neutral" view he shared in an interview in early October.  In other words, he seemingly dangled the possibility that the Fed's policy rate path may not be as steep as previously imagined.

Importantly, that isn't a promise.  He reminded everyone that the Fed is not on a preset course and that it will be increasingly data dependent in its decision making. 

As a reminder, the longer-run range for the fed funds rate is 2.5% to 3.5%.  The current target range is 2.00% to 2.25% and that will likely be raised to 2.25% to 2.50% at the December FOMC meeting.

There is still a good bit of rate-hike scope, then, to hit the upper end of the longer-run range for the neutral rate; nevertheless, a market that was pining for some ray of hope that the rate-hike path might be less steep ran with an assumption that the neutral rate will settle in the neighborhood of 3.00% or less.

We're not saying the market is right, only that yesterday's rally was rationalized on that basis.

[dTraderB]

High risk, but I have started accumulating QQQ FEB calls

 

So far, 4

 

Will risk about 7K on total position of about 15 to 20 calls

[dTraderB]

also looking at long VXX 

[Data]

He's essentially boxed in by market expectations of only 2 more hikes in 2018 and 2019 and by the low yield on the 10-year note.

 

https://www.cmegroup...wn-to-fomc.html

 

If the QE exit proceeds as planned, the first casualty will be European periphery bonds and the first beneficiary will be US treasuries.  

[dTraderB]

Powell's objective is very simple, quite basic:

 

DECELERATE the market's decline, Market was about to get on the slippery slope down and Powell had to move quickly 

to stop that, not totally, and not for too long, because he can't do either.

 

October 's drop was normal

November scared the crap out of Wall St and White House. 

 

Powell's FED was blamed for the market's fall and a possible crash, and also any economic decline.

 

His move yesterday was brilliant, carefully calibrated, proportionate, and it immediately removed the FED from the blame game and gave them room to maneuver,  now and during all of 2019.   The FED got their rally, they are heroes in the eyes of Wall St, the White House cannot now easily blame the FED for any down moves later, and the FED  shifted the focus to Trump & his Trade war.

 

And, with December's rate hike now baked in, and another possible one or two hikes in 2019, the FED now has room to LOWER rates, anytime: next year, following year, 2021.

[dTraderB]

Almost an hour of pure NQ bliss.... vertical ascent. 

And, now a quick reversal.