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Market throws a tantrum after hawkish FED disappoints, Trade talks collapse


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#1 dTraderB

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Posted 31 July 2019 - 04:02 PM

It is more about the Trade Talks collapsing rather than the FED miserly 25bps and relatively hawkish FED talk.

 

I do not see a steep decline but lots of back & filling with a general IT down trend during the next few weeks. 

 

All this can change with a few words from the FED via Powell and other FED members. 

 

But, August may be a dull  boring low-volume trading month, good time to rest & recover for the September to December period. 

 

Dow drops 330 points in worst day since May after Powell hints rate cut not the start of a trend

 

https://www.cnbc.com...n-a-decade.html

 



#2 dTraderB

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Posted 31 July 2019 - 04:04 PM

The two words from Jerome Powell that rocked the financial markets

 

 

KEY POINTS
  • Fed Chairman Jerome Powell sends the market reeling after he says the Fed’s first rate cut in a decade does not mean policymakers will follow up with an aggressive rate-reducing regime.
  • Powell calls the cut a “midcycle adjustment” and describes it as the latest move in a policy transition that started with its last hike — at the end of last year.
  • The markets had been widely expecting a very dovish Fed and instead heard a more hawkish commentary from Powell.
  • https://www.cnbc.com...al-markets.html


#3 dTraderB

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Posted 31 July 2019 - 04:10 PM

Helene Meisler @hmeisler
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Helene Meisler Retweeted Tom Hearden

For those who ask where the volume is. It is almost always on the downside, not the upside. The way markets are.

Helene Meisler added,

Tom Hearden @followtheh
Per my friend Bobby D-- 2:30 - 3:00 EST was the highest E-mini 30 minute volume period of the year --381k traded
12:25 PM - 31 Jul 2019


#4 pdx5

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Posted 31 July 2019 - 06:11 PM

I posted a few months back that a "good" trade deal with China is metaphysically impossible.

There never are 2 winners in a fight. And it is a trade "war" with China.  


"Money cannot consistently be made trading every day or every week during the year." ~ Jesse Livermore Trading Rule

#5 dTraderB

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Posted 31 July 2019 - 08:18 PM

I posted a few months back that a "good" trade deal with China is metaphysically impossible.

There never are 2 winners in a fight. And it is a trade "war" with China.  

 

True. The Chinese playing games, stalling; here is one of the unofficial official Twitter accounts trying to paint a fairly optimistic outcome of the recent failed session of talks; they will do this for months and years.....

The next round of China-US high-level trade consultations will be held in Sept. Based on what I know, the two sides will hold intensive working-level consultations in Aug. This arrangement shows Wed's talks were not bad. It is not accurate to say the talks ended up in a bad vibe.

6:03 AM - 31 Jul 2019


#6 dTraderB

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Posted 31 July 2019 - 08:21 PM

Why worry? Another cut in Sept when SPX will be near current record high or there will be a new SPX high. 

 

Jim Bianco @biancoresearch
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And hour after the presser ended and the probability of a Sept cut is 63%. The 3m/10y curve is still inverted (-6 bps) At the market low (DJIA down 424) the probability was briefly less than 50%. For now, stocks rise and fall with the Sept cut probability. Not dovish enough. https://twitter.com/biancoresearch/status/1156632529895645184 

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1:35 PM - 31 Jul 2019


#7 dTraderB

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Posted 31 July 2019 - 08:34 PM

Poor Powell pummeled by the "experts"

Tom Porcelli – Chief U.S. Economist, RBC Capital Markets: "We found the equity market reaction to Powell’s testimony interesting, in that the Chairman did not deliver anything that was wildly out of consensus. While the press conference left a lot to be desired, Powell in a roundabout way furthered the notion that this is not a 'one and done' move. Perhaps it was in how he delivered the message that had the market spooked. Powell looked incredibly uncomfortable in defending the rate cut when pressed by the media (as an aside, we think the folks asking questions today deserve a ton of credit for really trying to drill into his thought process). Perhaps Powell’s discomfort goes to the reality that the cut itself lacks much real justification given the robust performance of the US economy more recently."



#8 dTraderB

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Posted 31 July 2019 - 08:35 PM

Joel Naroff – President and Chief Economist, Naroff Economic Advisors: "The Fed became the drug dealer of choice when it implemented and more importantly, sustained quantitative easing. But the junkies, i.e., the markets, are now controlling the drug dealer. When the markets get starved for more opiates, they scream and yell and ultimately, the Fed provides the drugs. It did that in two ways today, by lowering rates and ending [quantitative tightening] early. It is likely the markets will soon start demanding more. Indeed, the huge decline in the stock indices in the first hour after the announcement and during Mr. Powell’s press conference, as well as the rise in the dollar, seemed to say that one 25 basis point cut will not do it.  As addicts will tell you, they can never get enough and the Fed is opening itself up to that potential problem, especially if the trade negotiations with China drag on."



#9 dTraderB

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Posted 31 July 2019 - 08:37 PM

Competitive rate cutting does not end well (as is currency depreciation)

 

Chris Zaccarelli – Chief Investment Officer, Independent Advisor Alliance: "The Fed is now headed down a slippery slope of cutting rates while the economy is still healthy – and economic data appears to be strengthening, not weakening. The real problems the economy faces are uncertainty over trade policy and a dollar that's too strong. In theory, cutting rates could help the latter problem, but in practice it will be ineffective because the ECB and BOJ are easing policy as quickly – if not quicker – than the Fed. Meanwhile, a 25 bps rate cut won't be able to solve business uncertainty caused by the trade war with China. Look for the US to continue to attract capital at the expense of the rest of the world, starting with a dollar that is the strongest it’s been in over a year – and on the day that the Fed cut rates!"



#10 dTraderB

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Posted 31 July 2019 - 08:38 PM

I am looking for a failed test of the record SPX high and then down again

 

Why Did Stocks Fall After Rate Cut?
Posted on July 31, 2019by macromon

Gravity.  Stock prices are waaay too high.

Stocks went down not because the Fed messed up.  If they needed to cut 50 bps and signal more to come because of coming economic weakness, what in heavens name were stocks doing at record highs and extreme valuations?   Nobody knows the future.

Expecting the Fed to see all, know all and precisely fine-tune the economy and markets is tantamount to having someone thread a needle with boxing gloves on and blindfolded during a rollercoaster ride.   The belief that they can have distorted markets beyond all repair.

sp.png?w=640

Seriously, folks, the lack of price discovery in all things financial is a big problem.

https://global-macro...after-rate-cut/