1987, Deja Vu

Insane, delusional valuations, high interest rates, no rate cut.

What could go wrong?

Visitors to this site already knew that ‘something’s up’.

Fully documented well in advance of today, was the A.I. bubble reversal, silver reversal, biotech reversal, and commodities like corn and Nat-Gas continuing their sustained decline.

Now the market hysteria is resulting in the typical knee-jerk, ‘flight to safety’ to the bond market (not advice, not a recommendation).

Surely, with all of that, the Fed will cut rates, right?

For the (potential) answer to that question, let’s look at the bond market.

Long Bonds, TLT, Weekly

Already proposed on this site, the Fed does not lead the bond market and interest rates, it follows it (not advice, not a recommendation).

So, what’s this chart telling us?

If the market continues its decline in the coming weeks, TLT price action itself shows a potential for higher bond prices (lower yields).

We’re just over six-weeks away from the next Fed meeting.

Fed Follower?

If the Fed is still a follower, not a leader and if bond (TLT) prices reach the target just as the September meeting is held, then, one would expect a rate cut (not advice, not a recommendation).

Important to note, if TLT gets to the target area, it’s in Wyckoff Up-Thrust (potential reversal) position.

Economic Air-Pocket

If there is a rate cut as a result of the leading action of the bond market and then it reverses to the downside (rates higher), that’s when it would get real interesting.

Correction or crash; we may have to wait until September to find out (not advice, not a recommendation).

Stay Tuned

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

The Danger Point®, trade mark: No. 6,505,279