That number is last week’s high. There are a number of indications that last weeks lows were significant levels, but most market participants seem to believe that they will be tested again. I am not so sure. Let’s see if SPX can get above and close over 4082.
Last week we showed the rate of change charts on interest rates and SPX values. It was apparent that the relationship triggered was rare, the last time it occurred, we saw stocks basically double in price over the following 18 months. The same catalyst exists now, the FED Balance Sheet is sitting there waiting for someone to use it. We all know the FED says that it is going to reduce the balance sheet, but if they stick to the given schedule it will take at least two years to have an impact.
Economic Drivers, a look at Possibilities….
I like to look at contrarian possibilities and watch for signs that they are starting to click. My base thinking is:
- that inflation is going to be difficult to control…
- Interest rates in the 2.5 to 3.5 % range have been the average over centuries, so while they are more than zero, they are extremely livable.
- What this means is we may see the yield curve going totally flat, 2.75 % for 3 months to 30 years, as the FED loses control to manipulate, and the economy learns to live with the rate level…
This is all early-stage Macro stuff, but that is where I like to reside.