It looks to me that all the bearish talk and reluctance to cover shorts on the part of the big money bears is premised on a belief that the Fed knows what it is doing, like cutting demand, while the White House is working on cutting inflation by increasing supply, i.e. Inflation Reduction Act and Chips bill.
As to the market, it is at a level that looks so easy to sell, whether one is selling out longs or getting short, almost up against 200 day average. I am trying to not succumb to the attraction, not easy, but I think there is so much more to go. Tomorrow we have the FED Minutes which will probably be more talk of how they need to dampen demand with more interest rate hikes.
Here are my comments from a few days ago on the 2 year vs 3 month interest rate curve.
“Last Friday’s employment report added a new wrinkle, the economy is stronger than the Bears forecast. So, I am watching the bar chart at the core of this analysis, the yield curve between the 2 year and the 3 month rates. You can see that the 2 year rate jumped up versus the 3 month rate on Friday’s employment number, ending a decline that started on June 16. Now I am watching to see when this chart takes out Friday’s high on a closing basis. That will tell us when the FED Fund rate hike is over.”
Here is an updated 4 hour chart, get a little more detail compared to daily chart, and allows one to see after hours gyrations. Last night was a good example, China reduced its interest rates and this chart had a knee jerk move to lower rates in the US, but has bounced back in today’s early trade.