Is The Fed Back in Play?

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1:32Is the Fed back in play? Hi, everyone. Welcome to the Real Vision Daily Briefing. With me today is Dale Pinkert, trading coach at TradeGate Hub. Hi, Dale. Happy Friday. Great to be with you, Maggie. The Fed is always in play. Yeah, it should be always in play, right? So before we dive in, we are heading into a long holiday weekend in the U S and UK. And you can kind of tell, cause definitely things got thin as we went through the end of the trading session. But I also understand there's another reason for celebration. It's your birthday weekend. It's my party. I could cry if I want to. I am an apple put, so I'll shed a tear for that.

2:12Okay. I love it. Well, happy birthday ahead of time, Dale. And congrats to you. It's always great to celebrate. And it's a good weekend. It's my daughter's birthday as well. We've got a lot of stuff going on this weekend. Gemini, another Gemini. Yeah, exactly. Good luck. Good luck with her. I need it. I need it. So listen, it feels like everybody's in a celebratory mood. We saw U.S. equities end the week with a rally, signs that lawmakers in Washington are getting closer to a deal on the debt ceiling. It's not there yet, but it looks like things are plodding along. That certainly helped the mood, as did the continued strength in technology.

2:50We did see bond yields rise on the back of some economic releases, and the dollar bounced back, racking up a third week of gains, even though everybody wants to hate the dollar. So there's a lot going on. So let's just start with what's top of mind with you as you look at all these cross currents. What are you thinking about heading into the long holiday weekend? That a deal in principle between two weak leaders, McCarthy took 10 ,000 votes to become speaker, and President Biden, half his party doesn't want him to run for re-election in 2024, doesn't necessarily mean that they're going to be able to rein in all their members to get it through.

3:35because both sides are going to feel like they've given up too much. This is not just up to President Biden and Speaker McCarthy. So the easy part is bringing something to Congress. The difficult part is being able to get the numbers of votes to pass it. Do you think there's complacency? Because everybody thinks like they can't possibly muck this up, right? The consequences are too extreme. It's like you can't. But I remember, you know, I always think like for I love talking to people a lot of experience in this because when it's in the hands of politicians, dumb shit happens sometimes. And I remember back in the wake of the financial crisis when everybody was like, we need TARP to go through.

4:23The politicians didn't do it. And the markets free fall like no one ever saw before. So they quickly they quickly freaked out and amended that. But, you know, there's always this, I think sometimes we're very complacent about the fact that cooler, calmer, smarter heads will prevail in Washington. And I don't know, is that a worry? Like, are we putting too much faith in the fact that everyone's going to do the right thing? No one ever thought there'd be the Capitol takeover on January 6th either. Right. So there's always that outlier. I don't have confidence in Congress. There's too much vitriol.

5:00They're even splintered within their own parties. So there are people that feel that it would be a good thing to let's check it out and see what a default is like. And, you know, I'm still not confident that it's going to get done. The market, and if it is, the market's already starting to discount it. S &Ps could see 4 ,300 if it goes through. But a lot of patient bearers, and I was not one of them, I wasn't patient enough, but a lot of patient bearers are looking short. S &P is around the 43 to 43.5 level. There's a lot of confluence of technical factors there. And I don't think the strength lasts more than another week, maybe two.

5:50Interesting. So do you think it doesn't last because larger macro events overwhelm the situation or is it just running to both? OK, it's both. And I think that, you know, we could have a mess trying to get this debt ceiling passed. The Fed is back in play. I think they're going to go. Why wouldn't they? The market could handle it, right? I mean, the market, I guarantee you that the Fed is not happy about the NASDAQ becoming parabolic here. There's even talk that certain home markets are improving again. And the inflation picture has improved in eggs. But Maggie, I went to a liquor store the other day and I paid$18 for a 12-pack of Coors Light.

6:45so it's becoming ingrained i won't go to that liquor store again but it's all right now we have we we got to get together i got questions about your choice of purchase too but well yeah listen we are going to do we're going to have you back on because i'm gonna i'm gonna jump off this for a programming note we hear you all we're here on a four o 'clock on a friday memorial day we understand we're gonna respect the summer fridays and we're gonna pull the daily briefing down. We're experimenting. We're going to do it earlier and we're going to make it a happy hour. And so you come back with your course and let's like talk about that choice.

7:19But it's your birthday, so I'm not going to harass you today. All right. But but but you're right. Like this is so just just for those who may have been unplugged and getting a jump start. And I know you're not all having a bank holiday, but it is it is it's going to be thin markets because a lot of big players are going to be out. We did get PCE reading on inflation, which is one of the Fed's preferred measures of inflation. It came in a bit higher than expected. Consumer spending's holding up. We see people out there. So it looks like, Dale, the market's now pricing back in the fact that the Fed may raise rates one more time.

7:53Do you think they're going to have to do that? Twice. Twice. And I think that until the market reassesses the easing that it has priced in for later this year, early next year, that it's wrong-footed on rates. Maybe it's a good time to go to the TLT. Yeah, let's pull that up because there is a big, we've been talking about it. For those of you who are members, you know that we've been not just on the daily briefing, but in lots of our programs, really taking a look at this. There's a big discrepancy between what the market thinks and what the Fed is saying. And that's problematic. What do you think is going to happen with TLT here?

8:34There's been so much volatility in bonds. It's kind of unprecedented, the amount of volatility we've seen. What do you see happening with TLT here? I see a breakdown. And about a few weeks ago, I was expecting perhaps a breakout to the upside, maybe on some risk off over that 109 level. Instead, we're breaking down. And there are record net shorts in treasuries. That's one of the rationalizations for staying long. Up until today's inflation number, we had terrible manufacturing numbers. Everyone's looking for the economy to slow. But if your viewers look at the bottom of that TLT chart, you'll see that when they were making lows in October, that momentum was making a new low too, which makes it a confirmed low.

9:25When momentum and price confirm, markets rarely bottom on confirmed lows and confirmed highs. So the conclusion I make is that we're going to take out those lows. And, you know, I wonder what that's going to do to banks' balance sheets. I'm wondering what that's going to do as far as competition. I know it's going to be part of the reason that the dollar, I think, has legs. And I love your description of the dollar rally. It's hated. It's not embraced. People are still very bearish to dollar. I actually think, and I brought a Euro chart we could get to, that Euro is going to trade back near parity.

10:09And this is part of the reason. because rates can go up on the long end, not because of economic data or an economic recovery, just because there are too many bonds and not enough buyers. The auctions have gone okay, but we're about to get swamped with supply. This is really important. So everyone's been thinking, do they get a deal? Do they not get a deal? Everyone that we've been having on our air, And I think this is why it's so important. We try to look out for people and try to get them the information. All the professionals and smart money are talking about, OK, so debt ceiling aside, what happens then?

10:51What's the deal with all the issuance that's going to flood the market? And what happens to liquidity issues around all this debt ceiling? So how are you thinking about the debt ceiling issue through? Let's say we get a deal, ugly, messy, not everybody's happy with it kind of thing. Talk to me about that issuance. Okay, well, you're going to have the Treasury has to refill their gas tank. And that means a lot of notes and bonds are going to come to market. A similar thing happened in 2011. And so when you have a ton of Treasury offerings, in fact, you know what's interesting, Maggie? People will take less interest to buy a corporate bond because they have more confidence in the corporation paying back on time than they do on sovereigns.

11:46Right. That's a statement in itself. You look at LQD, certain high corporate credits. They have a lower yield than treasuries, depending on the time coupon. That's so important because they are seen as the safe havens now. Like they're seen as the, and the, and the, this is. Buy junk bonds instead of treasuries, which used to be the best of breed and where the flight to safety was and where everyone wanted to park their money and they wouldn't have to worry about it. Yep. That's changing. It's changing. Cause there's a sovereign bond bubble that everyone's trying to figure out. How do you, how do you deal with this thing?

12:25It's a problem. Okay. Yeah. And you know, there are some smart guys that like the bonds, you know, There's a lot of people that like them. But it's one thing to have an opinion. But price is true. And the momentum confirming that low. And when you think about it, we're going to be in June. All the bonds did was stabilize, move sideways in bearish consolidation, and breaking down. You can't argue with the price. You know, the bonds look ugly to me right now, Maggie. I'm looking for new lows. There could be a pullback in the 10-year. They measured to about 390. We'll see if they hold 360 if rates come off.

13:17There are a lot of people looking for lower rates. I actually think eventually, even if there is a dip in rates, that the 10-year is going to make new highs into year end. In terms of yield? Yield, yes. Hey, everyone. We're going to take a quick break right now to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision daily briefing.

13:43So that's so important. So this carries a theme we've been having, this conversation, this very smart conversation we've been having all week with our guests. And I think Peter Buchfar put it very clearly. The people who are looking for the dip in rates are looking at the economy, right? They're saying recession's coming. I see things rolling over. I see inflation moving lower, even though we can have a debate about how low it's going to go. There's the credit squeeze coming. So it's the economic that they're looking at, part of the equation. But Peter said, I'm looking at the demand for Treasury side.

14:18You can tell me all that stuff about the economic side, but what about who's buying these bonds? How high do you have to have rates in order to attract buyers? And it sounds like that's what you're focused on as well. That's exactly. It's a crowding out in credit markets by all that supply. I have a lot of respect for Peter, and that gives me more conviction. I'm looking for new lows. I'm wondering how a lot of markets are going to react. And if the debt ceiling drags on, we could have a confidence. Kick the can down the road because they haven't ironed out all the details. We could have a bond crash.

15:00Okay, so, you know, kind of like what happened to the gilts last year. And the gilts are under pressure, too. All sovereigns globally are under pressure. All right. I'm just going to tell everyone, if you're on the YouTube side of our universe and you're a subscriber on YouTube, we are having everyday conversations about this on the member side. It's really important. And this is the kind of information from the very beginning. This dates back to the beginning of Real Vision that not everyone has. And you have to be aware of these risks because they're real and you're not hearing it elsewhere.

15:39And I think it's really important because this is a dynamic that it doesn't, when you look at the markets and the pricing, it seems like there's complacency about this, Dale. When I look at what's happening with stocks, if we were to have like a, I don't even say crash, because that's a hard word to throw out. But if we were to have a dislocation, if we were to have bonds not respond to Fed policy, and really instead go on supply and demand issues, that has repercussions for everything, including stock markets, doesn't it? Right. Well, remember, you and I have talked, I forgot who you interviewed, who said, if I get the dollar right, I can get everything.

16:20Peter Brandt. That's always what Peter Brandt says. Well, the only thing that's not being affected by this recent rally in the dollar are equities. Okay, metals have taken a hit. Copper was under pressure for China reasons. There are a lot of stocks that are not participating in this very highly concentrated, this rally. And so the dollar is going a lot higher than a lot of people think. I'm not looking for new highs. But when you're talking about parity in the euro, that's a pretty good - Sure, I think we might have had it up before, but let's put the euro dollar chart, because whenever we talk about the dollar, really folks like Dale who know like to talk crosses, not just the dollar, because it depends on what you're talking about.

17:10So if you look at the euro dollar, and Robert has a question about this we'll get to in a second. He's asking, do you think parity is still in play? And you think it is. Yes. If you see the blue speed line down there, it comes in a little bit above 100. That would just be a retracement of the rally that we've had. So the rally that we had finally completed up around 10.5. I wouldn't buy the dollar blindly, but if there's an opportunity on a rally to sell euros at 109, 109.40, even 8.5, I would go with it. The euro is a majority of the Dixie. So if Dixie pulled back to, say, 103, 102 and a half, that's a break to buy.

18:00I think that the dollar is giving an early signal of monetary conditions tightening and paying attention to the 10 year while the market is ignoring it. And, you know, I'll bring up 1987. It's the biggest case of a word called disintermediation. In 87, rates were rising sharply, and the market was going up. And it kept going up, and rates kept rising. And you never know when you're going to get that last snowflake for it to be the tipping point of an avalanche. But they will reconnect. And what's outperforming is most rate sensitive tech. Okay. So either, you know, I'm real wrong about rates and rates are about to crash or there's going to be a reversion to the mean, especially if I'm right about bonds.

19:00So this is, let's take a pause and underscore this because there are markets that are moving against the correlations that we normally understand. And I think that you and many others have kind of explained it as an elastic band stretching, right? So until the event happens, you can kind of get this period where it seems like these things can happen, but it's only because you haven't had the impact yet. So it sounds like you're saying you're worried about stock valuations here based on your thought about what's going to happen with bonds and the dollar. Is that right? And the economy. And that's why I think that there are also interests in having this debt ceiling fight continue.

19:53And for President Biden, everyone I talk to him with what the Fed has done in the last year with rates says that we're going to have not a great 2024, even if we get through 23. So everyone's going to be looking for someone to blame. And Biden can blame the Republicans for not bringing a clean debt ceiling bill to him and say that they wanted too much because they were going to cut social programs too deep when people need it. And the Republicans are going to say the Democrats want too much because they're unwilling to cut and the deficit's out of control. And I don't even think Jerome Powell would mind it, that if we can blame a debt ceiling political fiasco for what may happen economically in the next 12 months, even the Fed could say we had things under control until we didn't have the political will to pass the debt ceiling in a timely manner.

21:01So it's covered for everybody. Everybody wants a scapegoat, which is horrible. Horrible policy. Let's just say it's horrible policy, but it is absolutely politics these days, which is part of our problem. So Sandeep was asking, will this momentum take NASDAQ to new all-time highs? A purely technical outlook. This brings up a really interesting point. So you see things lining up where you think stocks are vulnerable, but the tape is hard to argue with when you see this round. This is true. Right? So there's a, and Sandeep, thank you for that question. There's a long-term, well, there's long-term, medium-term, short-term, but there's a, let's call it medium-term, where not everybody can be right.

21:50The markets are dislocated. Things are trading in a way that something has to change. There has to be a repricing. But in the short-term, you've gotten your head handed to you if you tried to short tech stocks, especially the NASDAQ. Look at just what happened in this week. with NVIDIA and the NASDAQ. Well, yeah, trade selection is everything. So, you know, people aren't getting hurt still being short the Russell, although the Russell's recovering and the Dow hasn't been as strong. And you're right. It's been concentrated in tech. But take a look at the Apple chart since you bring it up. Yep. Let's pull up Apple.

22:27So, you know, NASDAQ's gone parabolic. Like NVIDIA, such a big gap, people had to tack on some paper on top of their charts so they could be able to graph it. But look at Apple. Dale, you watch markets all the time. I was flabbergasted at the gains in NVIDIA. There were a lot of people who were anticipating. A lot of people were thinking it was time to take profits. Even people were so bullish to stock. Like there's no way. To see a stock like that go up 25 % in one day, that's an extraordinary move. I heard it was the best earnings report, not just for NVIDIA, but for any stock in history. Yeah.

23:14In history, unprecedented. So is it real? Like, you have to ask yourself, is this real? Is there something different with AI? And this is the debate we're going to have. And I told you all, we're going to have like, we're going to do a lot on AI coming up in the next few weeks because it's the topic of the moment. But it just, how do you wrap your head around this? Is it because you, because it's like that, God, this, this, it, it is the, it's going to change everything. It's this disruptor, it's real. And then it's like, or is it just that same trap we all get stuck in where we chase it and then it's going to end battle.

23:52How are you thinking about this, Dale? Well, you know, if you think about AI itself, you're right. When you think about valuations, that's a different story. And that's, you know, there's no doubt that there's overvaluation. And that is, that gap, I think, is going to be filled that NVIDIA put in. It may have to do some distribution here first. And, you know, you take a stock like Apple, it's the most loved stock in the world. I could have used a little extra artificial intelligence buying puts before the earnings. And that's why I told your viewers and you the last time we were here is I'm doing it with September puts because there could be a good earnings report like Microsoft that ripped the cover off the ball.

24:39And that's exactly what happened. But consider what NASDAQ has done, almost every tech stock, and look at Apple has been sideways since the earnings report. It's destined for another high, but it won't confirm with momentum. Maybe it trades 180. But pay attention to Apple. And if you ever see the ticker in Apple trading under 170, that's the gold signal for positions. I continue to accumulate short positions because once we're back in that channel under 170, the lower channel line comes in at about 125. So you see it going to 125? Yeah. And part of it, I did have a fundamental rationale and it was China.

25:35And what did China do this week with Micron? Yeah. It's only the beginning. We're going to take another quick break to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

25:54so we're going to talk a lot and and and all chips like there's a lot of political risk out there in technology and we don't talk about it enough because right now it's all about the enthusiasm of ai so that's something we're we're going to be looking at going forward but well you know china isn't being aggressive uh they're retaliating because we already put sanctions on them for getting any kind of chips. Going after Apple would be, I'm not going to say a nuclear option, but that's a new level of aggression. Aren't there Chinese phone manufacturing? Can't you just, if you're in China? I tell you what, it'd be a lot easier for Xi than Biden to say, we're not using Apple phones.

26:41Absolutely. I mean, there's no – yeah, there's nothing stopping him from doing it. And their new guidelines are security over profits. China does need the US as a trading partner, though. It's very hard to imagine them, even Xi with the command control center, being able to do that. But it is an interesting – so we just got a question from Xi Blackburn. Well, yeah, right. Right. So someone very on our platform, and we do geopolitics and China risks on that a lot. Somebody said there's the scenario. And then but that's if you assign rational thinking. But the problem is politicians aren't rational and leaders aren't rational, especially dictators are not rational.

27:27So whether you're talking about Putin or Xi, like you can assign all your odds to it. But then there's this unknown that you're just not sure if they'll do the irrational thing. Want to squeeze this in? G. Blackburn asked, how about put spreads on QQQ and DX? Yes. Yes. You know, what's the right day? Buy time. You know, go out to December. I want to tell you an interesting story and part of the reason why I still think there's a break coming in the market. You know, I talk to a lot of people like you do, Maggie. and this one analyst who I noticed his work a long time on this charting platform.

28:08And he did a lot of work with planetary reasons, everything. The guy lived and breathed it. And he passed away about four or five months ago from cancer. And I followed his work and he said there'll be a March low, which if everyone looked at their S &P chart, that was the last low. And he has had a July crash date that was so important for him to get out to his followers and listeners that I'm paying attention to it. Interesting. So, you know, with his last bit of energy, he made sure that people were aware that liked his work about the danger coming in July. All right. Well, that's always something to pay attention to.

28:58I'm going to have to hook you and Mish up because she watches. You traders watch everything, like everything, which is what I love. I want to get to gold because we had a conversation on the platform. Roger actually just, it went out live. Members, if you're listening, probably, hopefully caught some of it. It was on for Plus about gold. Daniel Jarrett, chief investment officer at Strategy Capital, spoke to Roger about how they felt about gold. I want to get your thoughts, but let's listen to the clip first. Okay. Yeah, we don't consider gold in kind of the super cycle framework just because it has so many different faces to it and so many different sources of demand.