Where We Are…

This past week I believe we have seen a number of things resolved based on activity over the May 11 to June 16 period:

1. In commodity prices we have seen a top on June 9th and a downturn confirmed.
2. We have seen the turn in the upswing of the 10-02 yr yield curve on May 9th and the June 22nd high of the important 2 year interest rate confirmed.
3. As a backdrop, one has to keep in mind that Powell is no reformist. He will not bury all the stuff that Greenspan and Bernanke started, which, with all the consumer liquidity present, is what would be needed to start a recession. All Powell wants is to be seen as the one who throttled inflation.
4. We therefore are seeing money cautiously move out of inflation boosting areas and into other more positive areas, like stocks and bonds.
5. We also are seeing a cautious move out of precious metals as more positive economic outcomes, while not being believed on the whole, are nevertheless being entertained.
6. Looking further down the road, markets moved or squeezed by artificial forces, in this case the FED, can have dramatic rebounds, beyond a traditional 62 % Fibonacci rebound which would take the S&P to 4375.
7. Lurking in the background of all of this is the market contingent that is looking for a new low, maybe in 3500 area for the S&P based on unenthusiastic earnings. All I can say on that point is, if there is one thing CEO’s have learned over the past 40 years is how to generate a good earnings number, whether it be raising prices or pressuring employment costs. We know which one they are using now.
8. We are currently modeling some market scenarios and will update you with those in the coming week.