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The market has broken the latest iteration of its downtrend by moving sideways. Nothing has happened yet, but obviously, something will happen after 2 PM ET today. That’s when the Fed will announce a 50 bp increase in the Fed Funds target and the beginning of Quantitative Tightening, QT. They Fed will verify that it intends to reduce the size of the balance sheet by $95 billion per month, getting to that rate of reduction over several months of increases. That’s the more important of the two announcements.
It has already told the market that this would be coming, through the FOMC meeting minutes, and Powell himself saying so at the last dog and pony show for the Wall Street Captured Media (WSCM). With the market holding above the final sport level on the S&P 500, there’s no reason for the Fed to spring any surprises. The Fed doesn’t like to surprise the market. Unless it’s a happy surprise for the bulls.
The bigger news will come from the TBAC whose report to the Secretary of the Treasury is usually issued the day after the Quarterly Refunding announcement. So far, no release, a day late. They may be waiting for the FOMC to go first. This report is important because it will give us the schedule of coupon issuance for the rest of the current quarter and for the third quarter. It will also provide an estimate of net T-bill paydowns for those periods. We already know they’ll be big, hence the reason for my ongoing expectation of rallies in stocks and bonds.
Don’t worry, it’s only temporary.
Meanwhile the 24 hour ES S&P 500 hourly fugutures look set up to meander between 4210 and 4150 until the Fed does its doody this afternoon. Should they slip out of that range, no doubt the post meeting, and intra dog and pony show moves will bring them back to the range. Then whatever happens after the dog and pony will be reversed tomorrow. My advice. Take a nap. Take a hike. Enjoy the day. Come back tomorrow.
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