Hello All:
We are in a NEW BULL Market. Everybody must be saying. WRONG! If you recognise that most of the rally this year has been from FAANG, then we can have a common talking point. If somehow you think that we are heading to 5000 SP because the Fed is going to pivot, then you are really NOT paying any attention whatsoever to what is going on in these markets. Everybody is trying to front run the Fed by thinking they will know before the Fed does when they will pivot. I don't expect a pivot unless we have an emergency NOT because the Fed is finished with their job of “defeating the inflation problem.” That is the misconception I believe that many people have right now. I believe we could have a pivot if we have a heavy sell-off due to a credit event or another large scale problem in the global markets. What could that be? Well, I think that we are close.
What you should be worried about more than the SP and the Dow selling off is the BOND market selling off. It is completely cratering down to near historical low levels:
Currently, we are trading around 119 and it is looking weak. We are only 1 ½ handles away from levels we have not seen in 12 YEARS. YES, 12 YEARS. Furthermore, we are looking at a YIELD CURVE that is getting LESS inverted. This is very curious, but also it seems to lend the possibility that the liquidation is happening on the long end because of margin calls or fear of margin calls by big money (pension funds, hedge funds) and all others that are forced to buy Treasuries and the like due to financial mandates (foreign governments, large public entities around the world).
The Yield Curve is also actually un-inverting as we see in the below chart:
From the above chart, I think that we have hit the bottom on the yield curve and it will continue to rally from this point. Big money does not hold on to near-term debt, but rather long-term debt. The liquidation of the Bond market will push the yield curve back to more NORMALIZED character that we saw until early to mid-2022.
The sell-off that we are seeing this week is just the beginning. There are many different tactics and strategies that you can take to hedge or manoeuvre in these markets to protect wealth. Let us help you navigate these turbulent waters.
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Best Regards
Edgard Cabanillas
President - Alpine Trading LLC
TEL: 949-357-4948
Email: edgard@alpine-trading.net
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On the date of publication, Edgard Cabanillas did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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