Trading a Market Based on Hype

The Environment

At the moment I feel lost in an environment where economic fundamentals are ignored.  The Atlanta Fed GDPNOW estimate for the first quarter has been updated three times and still is at 0.4 %.  Economic reports add information that point to a slowing down.

However the markets seem to be relating to Hype.

Stocks keep trying to push higher and while interest rates for this cycle appear to have topped early in the 4th Quarter 2018, the markets are trying valiantly to steepen the yield curve.  My contrarian view is that a radical flattening of the curve will surface and I would not be surprised to see the 30 year bond take out the 2016 highs. In that scenario the FED will not be able to lower short term rates fast enough to keep from having the 30-2 year curve go negative.

In the meantime The Fracture Chart is being tested.

See chart here where the fracture line sits near the bottom of the 0.040-0.060 support area.

 

 

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