Category Archives: Blog

Classical Thursday

 

 30 minute atr
 daily pivots
 weekly pivots
 upside retracements
 downside retracements
 regression channels
price support and resistance
On the economic calendar:-
08:30 Jobless Claims (Consensus 310 K v Prior 302 K)
09:45 PMI Manufacturing Index Flash (Consensus 57.6 v Prior 57.6)
          Bloomberg Consumer Comfort Index
10:00 New Home Sales (Consensus 475 K v Prior 504 K)
10:30 EIA Natural Gas Report
11:00 Kansas City Fed Manufacturing Index (Consensus 6 v Prior 6)
          3 Month Bill Announcement
          6 Month Bill Announcement
          2 Year FRN Announcement
          2 Year Note Announcement
          5 Year Note Announcement
          7 Year Note Announcement
13:00 10 Year TIPS Auction
16:30 Fed Balance Sheet
           Money Supply
POMO:-
None

Classical Tuesday

 30 minute atr
 daily pivots
 weekly pivots
 upside retracements
 weekly retracements
 regression channels
price support and resistance
On the economic calendar:-
07:45 ICSC-Goldman Store Sales
08:30 Consumer Price Index (Consensus 0.3 v Prior 0.4%)
08:55 Redbook
09:00 FHFA House Price Index (Consensus 0.3% v Prior 0.0%)
10:00 Existing Home Sales (Consensus 4.99 M v Prior 4.89 M)
          Richmond Fed Manufacturing Index (Consensus 5.5 v Prior 3.0)
11:30 4 Week Bill Auction
          52 Week Bill Auction
POMO:-
None

 

Classical Monday

 30 minute atr
 daily pivots
 weekly pivots
 retracement levels
 regression channels
price support and resistance
On the economic calendar:-
08:30 Chicago Fed National Activity Index
11:00 4 Week Bill Announcement
11:30 3 Month Bill Auction
          6 Month Bill Auction
POMO:-
10:15 – 11:00 Outright Treasury Coupon Purchases between $1.00 – $1.25 billion

On to the Next

David Kotok of Cumberland Advisors (and his Chief Economist Bob Eisenbies) are friends of mine. Bob and I met at a meeting with Sec. Geithner and he introduced me to David. They are both class acts and their notes are regular reading for me. David has just penned a missive on a shift in Tapering as Tightening. I have a slightly different view but the details are important.

As we know, the pace of Fed buying continues to drop toward a goal of zero by Fall. The size has now crossed under the net new issuance of the shrinking deficit creating “free radical” Treasuries for the first time in quite awhile. Also, and more importantly in our opinion, the duration of the Fed’s balance sheet has approached 6 years. This was the target bucket of QE and longer than I was comfortable with (see older rants). Cumberland’s conclusion is these factors will amount to a shift in rates that results in the initial “tightening phase.”

I may agree with that idea in theory. However, I believe the significant event upon us is/will be the coming market shift to these new realities. The calibration of monetary policy is not adjusting, yet. In a cycle a violent correction after a long trend ,that fades back to trend is a common pattern. The taper tantrum was that event for us. Tops are long protracted frustrating affairs, unlike market bottoms. That a significant community has embraced fanciful new age thinking to justify their lengthy holdings makes us happy.

Thus, the question for us is not whether Tapering (or halting LSAP) is Tightening, or whether or not rates will rise – they will. The focus should be on the fashion in which the shift manifests itself on the curve. The Fed, to the extent they will matter at all, will be an observer of those shifts. We believe the curve is too flat now. We also think the initial adjustment will be embedded in a higher medium term nominal growth path. We continue to believe the 30 year bull market in Treasuries ended 2 years ago and a generational top is being formed.