Global investors raised their U.S. equity holdings to an 18-month high in January, betting fiscal stimulus from U.S. President Donald Trump will spur growth, but doubts are growing whether he can deliver as much as markets have priced in.
The USH traded in a below-average 2-20 point weekly range and settled up 16-ticks on the week and down 10-ticks on the session at 152-09. As expected the Ten-year successfully ground higher and tested and rejected my upper weekly and key resistance targets at 125-02 and 125-10.
We first focus on WTI crude oil. On the weekly chart, this market still looks strong, and looks to be a buyer's market. We believe that $58 per barrel is not out of reach. A key resistance trendline has been broken and that is a big technical signal.
Remember over a year ago when they first raised hikes-they huffed and puffed warning everyone that they would raise rates several times in 2016 and viola nothing happened until now. Now they are repeating the same thing all over again. To illustrate how bad this economy take into consideration that the Fed has raised rates only twice in the last decade; the economy was a lot stronger in 2006 and 2007 than it is today. Yellen’s statement below illustrates how the Fed is positioning itself so that it can pull another “oops we were wrong once again” moment.
Interest rate hikes are back on the radar at the Bank of Japan, for the first time in a decade, as the U.S. Federal Reserve's tightening cycle pushes global bond yields higher, heralding a new era for central banks retreating from post-crisis stimulus.
So much for limited losses last week as the Bond took out my lower weekly boundary projection (148-12/10). The USH finished the week near its low as the Bond posted a new contract low and contract low settlement.
Monday the USH should trade between possibly 150-24/20 and at least 152-03. If the upper level is broken the USH should test 152-25/28. If the lower level is broken the USH should test 150-08 or 150-00. The 10-year struggled to move higher (see last week Monday’s report) as the Note finished the week testing and holding above my lower weekly boundary projection at 124-20 (Dec contract).
In equities, developed markets are favored over emerging, cyclical sectors over defensive, banks are expected to benefit from steepening bond yield curves, while infrastructure spending could boost housing and construction stocks. That's the consensus. But what goes against that grain? Where might the wrinkles appear? And even within the broad consensus, are there any eye-catching forecasts or trade recommendations?
Last week the Bond tested and narrowly surpassed my maximum lower weekly and end of the year boundary targets at 153-24 and 152-17; Last week the Ten-year opened on its high and steadily sold-off as the Note shattered my lower weekly boundary targets (126-26 and 125-29).