The market was awaiting Fed Chair Powell’s testimony to congress to clear up further expectations of a rate cut. The market was pleased. Now the question is whether it will be 25 or 50 basis point cut and how many cuts will we have this year going into next year.
US markets have hit all time new highs… and we will likely see even more record new highs. Again, the market loves the cheap money. There is also really nowhere else to go for yield except the markets. If you follow my blog and social media, I have been speaking about this since last year.
The Fed gets its signals from the market. Their mandate is to keep assets propped up. Central banks are stuck. Their tools are running out.
On the China front, there are now new media reports claiming there will be no trade deal anytime soon…something I have said for quite sometime. Larry Kudlow even came out saying there may never be one.
Again, as mentioned on my blog and social media, China holds a lot of keys. They can wait for a weaker President. They know President Trump’s Achilles heel is the US stock market. For re-election, President Trump needs higher stock markets to keep up the illusion of a strong economy. If he does not get this,the Democratic candidate for President will win.
China knows this. The added bonus to their position is that they have no elections. They also have a firm control over their people. They can quash any type of large uprising. As I have said, President Trump will be forced to the table to sign a deal that will be dictated by the Chinese.
Many analysts have said that President Trump should have been more aggressive. He had China when it came to agricultural relief and should have piled the pressure to force China to the table.
There is one thing that could benefit President Trump. He can force the Fed to cut rates quicker and more numerous than expected.
Watch for President Trump to introduce more tariffs on China. Much larger than before. The market will not like this. This will force the Fed’s hand.
Again, this will strengthen my notion that the Fed mandate is to keep assets propped.
There was a lot of interesting points brought up against Facebook’s Libra digital currency coin during the testimony. It is worth going over this.
Congress essentially said that they would intervene to force Facebook to delay the release of Libra. Of course the government and central banks want to be the first to issue digital currency for taxation and tracking money purposes. This is the plan.
There is this idea that there is now competition between the government and Silicon Valley, to see who releases digital money first.
In Facebook’s case, some say this move is to save their business as Facebook activity for the year has declined by 40% in Britain, and double digits in America and Canada and other European nations.
I have mentioned on how after the next crisis, a digital currency will be issued. This is required for the MMT and helicopter money route. Interesting developments here, but government is trying to be the ones who protect the people from big tech.
I do not mind big tech having my data because they can only sell it to other business’ who try to sell me products which will better my life. They cannot force me to buy it, they have to win my business.
If government has this data, they can force you to do things. If you don’t comply, you go to jail. You have no choice. Data is much more dangerous in the hands of the government than corporations. I have spoken about big government being an issue and how it is a key trait for socialism. Keynesianism/mercantile economics theory support this notion of big government and we are approaching a period where the banks may own everything. The next QE may see banks be the last buyer of last resort.
- Monday: China GDP Q2, NZD CPI Q2.
- Tuesday: RBA Minutes, ZEW Economic Survey, GBP Average Earnings, US Retail Sales Group (June), Fed Chair Powell Speech.
- Wednesday: GBP CPI (June), CAD CPI (June).
- Thursday: AUD Employment Data (June).
What more can I say about the US markets. Where can you go for yield? The market wants its hit of cheap money, and as long as the Fed provides this, we will see new highs.
As mentioned, if President Trump announces more tariffs, the market may fall however the Fed will be speeding up their rate cuts. I expect to see regular pullbacks while maintaining the higher lows.
If you do a fibonacci on the weekly charts, you can see the targets. 3100 for the S&P, 8360 for the Nasdaq, and 27954 (just under 30,000) for the Dow Jones.
Super interesting chart for oil. We had multiple waves on the downtrend, and now have made a cup and handle pattern. I would be cautious on this one. I personally Oil should be heading lower, but it is due to geopolitics (Iran) that Oil has had this bid. The pattern does show a cup and handle and a first higher low in an uptrend.
Conversely, the lower time frame (the 2 hour which I use) shows a potential bearish case if the levels below are broken, that being the 59.60 zone.
Brent crude is showing more of a bearish case on the 2 hour, but I must stress to wait for the right break. The longer time frame trumps the shorter, and the daily shows a first higher low.
The DXY had multiple waves up, and now created our first confirmed lower high…unfortunately that break occurred on a Friday. I will await to see how the market opens…
On this point there are many USD pairs that are showing this first swing. I won’t comment on most them, rather posting the charts below so you can see the swings.
Notice the pattern on USDCHF…
GBPCAD has shown us a downtrend, and now a range at an important support/flip zone level on the long term (daily) chart. Awaiting the break.
Lastly, CADCHF. An example of a textbook play. A nice up trend, signs of exhaustion at a major resistance/flip zone, and now just awaiting the break.