MBCC Trading Highlights 7th November'22 - market torn b/w a Fed pivot or not, what is really happening here?

After the Fed FOMC last week, the market is trying to decide whether the recent bounce is in fact a Fed pivot, i.e. more dovish bias going forward or just a short covering rally from oversold positions. The rally from 3600 has gone all the way to 3900, but in the longer scheme of things, even a move to 4150 will not mean a break, as the long term downward trending channel still sees the market in a negative trend until it breaks that level convincingly.

So, has the Fed really pivoted?

The Fed has NOT pivoted in any way, this is just the market trying to get ahead of the Fed trying to pre-empt that they WILL soon enough. But as we know the Fed does not do what the investors want, but what it sees, no matter if too late. They play a backward looking function, and only REACT, never PRE-EMPT. For that they need the data or markets to be very weak, which they really are not. The more it rallies on hopes of it being done, the more conviction they have to keep going as inflation will NOT come down. Their inflation and even their job payroll numbers suggest strength, as we saw in the NFP last week. The Fed needs evidence of weakness, the irony is, that the more the market rallies, financial conditions ease, the more they will have to keep going!

Today we take a look at our macro technical indicators, Rate / Swap spreads and Bond and Vol indicators and correlation charts to suggest why this is nothing other than sharp short squeeze catching a market on the wrong foot. How to be positioned?

We also discuss XLE 0.00%↑ vs. Oil - what is really driving that spread? Technicals/money flows are all great, but watch the fundamental driver, as that really matters more than anything.

We discuss Gold and Silver with new trading ideas!

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