We have Phil Streible joining us this morning, chief market strategist of Blue Line Futures.
Phil, welcome. We just had some numbers coming across the wire import export data. Obviously not the most closely watched numbers of the week. Exports coming a little higher than expected, expected imports a little bit below what analysts were looking for. But let’s begin with what we’re seeing in terms of treasuries. This week. It appears to be a market that’s coming to grips with that higher for longer, higher for a longer narrative in a relentless move up here in Treasury yields.
Yeah, if you look at the Treasury yields, but they’ve been quite volatile. I mean, we’ve got a ten basis point correction going on today. Yesterday we had a ten basis point up for a rally. It’s really kind of come unhinged if you look at it, you know, the course of the week, it seems like the geopolitical tensions escalations going on over in the Middle East really question whether or not the Federal Reserve can keep on a interest rate hike path.
They want to see what the ramifications are from that. I think that if you do see crude oil prices continue to tick tick up on that, the Federal Reserve is going to kind of I think they’re going to surrender and give up on fighting this inflation for the time being and wait till the dust settles over there.
Phil, everybody’s been talking about these pullbacks and getting excited about them, right, In terms of the moves off the spikes that we’ve seen in yields off the highs. But it seems to be more for me a two steps forward, one step back kind of thing and pretty well-defined trend to the upside here. Still established. And I mean, you can see this right, playing out if you’re a home buyer, ultimately you’re you’re feeling it.
If you’re trying to get an auto loan, you you see this right on a daily basis. If you hold a credit card balance ultimately, I mean, it’s pretty well defined here. Yes, we’ve pulled off the spike high, but I mean, stubbornly elevated levels.
Oh, so I am trying to purchase a second home right now. And the clause that was within the the letter, the approval letter said that interest rates couldn’t go higher then I think it was 7.25%. And this, which is four, had a couple weeks. Yeah. When it went right above it. So if we were to accept, if they were to accept the offer, I’d have to get a new, a new letter.
So I mean these are like real things that are impacting people. I couldn’t imagine going out and trying to get like an automobile or having those high credit card debt. So I think the Federal Reserve, I think they’ve got to take a different approach to things. I think yields and interest rates need to come down substantially. You can’t rise that fast without breaking things.
I can’t imagine the pinch people are feeling adjustable rate mortgages or home equity lines of credit, for example. I mean, is it staggering? I would imagine every time you open up that envelope that bill when you check in online, I mean, it’s got to be higher and higher every month, basically. But the market here is hanging in there pretty well considering.
And we’ve got the S&P set to open up this morning just below 4400.
The S&P. So what’s going on right now is that they’re not really paying attention to that inflation data that came out like when we saw a CPI come out yesterday. That was the first time that they had acknowledged any inflation data all week. They’re really focused on these geopolitical risks and tensions rising and thinking that the Federal Reserve can’t make any kind of moves.
So we saw barely an up tick on expectations for further interest rate hikes. But I think the reality of interest rates coming down, it looks almost certain. So, you know, a lot of the foreign currencies are starting to get a boost. The US dollar is starting to come back. It really needs a break below 105 50 in order to trigger more of a neutral trend.
But you know, you look at some of these moves right now. I mean, gold’s up $45. Silver is up $0.73. Yeah, I don’t think people want to go home heavily weighted in equities. And with these types of events that are occurring overseas.
Yeah. You know, I have a question for you, Phil, In terms of the Fed, I’m wondering if they’re a headwind for the market right now or a tailwind. We’ve been looking at a lot of cheap type price activity, a very consolidated environment, a market that’s got a very well-defined upper and lower extreme and not a lot of conviction right now.
Which do you see them as yet?
The Fed, the we had a ton of speakers come out this week and kind of the way that I packaged it together is that they’re taking more of a softer approach. They’re they’re they’re really saying that they’re going to like where things kind of settle at these levels. They’re not mentioning anything about cuts, but I think that they’re like they can’t just say that they’re going to take a breather and let things let things play out.
They do come with that last sentence where but if we need to raise rates, we’ll do it again. But I don’t think anybody believes that anymore. It’s just there’s just too much pressure going on. I mean, the amount of interest on the debt and the national debt is like insane. So, I mean, they just can’t do that. These things are going to play out or the Fed is supposed to operate independently from politics.
I think that that is going to clash significantly, especially coming into an election cycle.
Big move up this week, also raising some concerns in terms of some of the regional banks. Right. We saw that playing out earlier this year in the spring and obviously when we get to 5% in the 30 year, that’s going to spark that conversation again. Take a look at the charts here real quick. I just want to point to and provide a couple of visuals in terms of the discussion we’re having here.
A look at what we’ve seen recently, the 30 on the left, the ten year on the right, 5% here fell last week on the 30 year still held below that this week. But hanging out into the end of the week here, right around four eight, you can see the ten year just below four nine last week. Look at this run up that we saw in gold.
Best week for gold since March. I think a seven month best week run here. We’re up to 1932. Definitely a reflection of some of that geopolitical tensions, geopolitical uncertainty. Talk to us a little bit about currencies, The US dollar right now still relatively contained considering at 106 and you’ve got the yen kind of falling off the radar in some ways.
Uncertainty about China and news about some stimulus, but still nothing specific there this week.
Yeah, no. In China they can’t get inflation to save their lives right now. I mean.
It’s just terrible And then so they’ve got to come in they’ve got to create something going on the Japanese yen, they got one little safe haven bid and these problems that are going on. But other than that currency is flat, the one to watch is probably the Swiss franc. I think that’s the leading today. It’s up about a half percent.Brazilian real just under 1%. And the peso also. So those are some obscure ones that will impact some of the commodities that are out there. But, you know, we just got to keep an eye on some of these things because these markets are wild.And with all of that playing out here, we want to take a look at the US dollar as it has seen a little bit of a rally, but also relatively contained right from the week lows we saw around 105 29 back up to 106 40. Taking a quick look at where we are on the daily candle chart here, though, you can see not a lot of real follow through after a big run up to July lows around 99 back to 107.
And here we are mostly overlapping rotation on Sideways as traders wait for more information. Appreciate you joining us, Phil Strebel this morning. Thanks for sharing part of your Friday with us. Check this out at Blue Line Futures. Some chief market strategist there now for a check on some developing stories on bring in Jenny Horne, markets