 Hey everyone, this is Mike Kramer, my capital of the weekly check-in today is July 4th Markets here in the US are closed today, but they'll be reopening of course tomorrow, July 5th, which is Wednesday Tomorrow seems to be a little bit of an overlooked day Perhaps because we just went through a big June op-ex and then of course you had the J big J.P. Morgan collar that expired last Friday yesterday obviously being a half day here in the US and tomorrow Really, which seems to be lost in the mix is that tomorrow you're going to be getting the June Fed minutes and those are pretty big important minutes I think because they're going to give us a little bit more of a look into terms of what Exactly the committee was thinking about when it decided not to raise rates in June and but ultimately give higher projections for where the Overnight rate is going to go and you know more more sort of hawkish outlooks in terms of the economy Also, of course on Friday, you're going to be getting the big big BLS job report But today we're going to focus mostly just on the Fed minutes and it seems likely that Given sort of the data we've gotten to this point and the information we've gotten about what took place of those minutes You're going to see that the majority of participants I think favored obviously more rate hikes and that's how ultimately they came to that 5.6 percent number Also, I think you're going to continue to hear tones of you know inflation moderating but at a much lower pace than what was expected It would be really interesting though I think from a Fed perspective to see if they make any comments on the long end of the yield curve Because that's really the part of the curve that sort of has allowed the market the equity market to really move higher More recently more than anything And that's primarily because it's been more range bound But when we look specifically more at the shorter end of the curve you can see that the December Fed fund futures are now making their way Up to 5.4 percent. There's still a little bit of ways to go here because you know the Fed minutes and The Fed the Fed dot plot indicated a rate of about 5.6 percent and interestingly That's where the high was basically back on March 8th where the market saw rates going to 5.6 percent So it seems almost as if the Fed officials are taking their lead from where the market is sort of dictating They go with the ultimate rate-high policy and what's also interesting is that you've seen the the futures for January begin to move higher for February begin to move higher for March moving higher and For June moving higher you can see the June Fed fund futures for 2024 up to about 4.96 percent and the December 2024 contracts are trading around four and a quarter or so This is important because remember the Fed also indicated that it sees rates coming down to about 4.6 percent next year as it anticipates inflation kind of cooling off and the idea here being is that As inflation comes down rates don't need to be as high to be as restrictive They're thinking about restriction in terms of real rates not in terms of nominal rates So if you think about a 5.6 percent Terminal rate for 2023 with a 3.9 percent Inflation rate that's the difference between the two is your real rate And so that's what that moved down in 2024 really represents and you can see that yields on the short end of the curve have certainly responded with the two-year now Hitching very closely to 5% and I think ultimately you're going to see it get back to this March high as well Back to this 5.1 percent region and then from there obviously you'll have to go through and continue to assess that But again any sort of indication about what the Fed is also thinking about the long end of the curve I think is very important right now because the long end of the curve has really been range bound between call it You know 3.9 and 3.3 percent and with this little period of time where we got above and it seems likely Everything is reverting back to those early March numbers And so it would seem that once we get above this 3.9 percent region on the 10-year It seems likely that we're going to be back at a 4.1 percent number and potentially even a four and a quarter percent number Because I think ultimately that's going to be determined upon what the job report is going to be on Friday and Expectations are for that to be a pretty strong number and for the unemployment rate to actually fall from 3.7 percent to 4.3 point 7 percent to 3.6 percent in this June reading and this is important Also, you can see it almost looks like there's a little bit of a cup-and-handle pattern That's present in the in the in the in the 10-year as well You can see that by drawing this out right here and then you can see the The handle portion right here with this with this channel And basically that's already started to show signs of breaking out and it's broken this a long-term downtrend here RSI momentum clearly still bullish and positive suggesting you're going to see higher rates and the same thing as present in the 30-year You can see clearly momentum favors rates rising. You can see there's a similar Also cup-and-handle tight pattern that's formed right here as well You can almost call it also an inverse head and shoulders and this is the handle and you can see we're getting very close to breaking out I think once you get above 4 percent on the 30-year you're looking at a four-year That's going to move back up towards the upper end of this range That would be what I'm thinking about in terms of how I'm looking at this and this is important because Clearly the dollar has sort of also been forming a similar pattern with a cup-and-handle like look to it Here you can see the cup and here you can see the handle portion Which looks also moles like a bull flag and you're looking for the DX Why really here to get above this 103 and a half level which likely carries it back to this 105 60 region as well and obviously this is really important if you begin to see the 10-year move out of its current range the 30-year move out of its current range the two-year move up to the upper end of the range This could allow financial conditions to really start to tighten again and allow spreads between high yield and and corporate debt begin to widen again and this could be What sort of is the piece of the equation that's really allowed the equity market to rally as much as it has because when we at the end of The day when we look at Financial conditions you can see that the Chicago Fed National financial conditions index has actually shown a lot of easing taking place And this easing is a direct result of basically a bond market That's been very range bound of a bond market That's allowed spreads to narrow and come down and this is very important because if you begin to see financial Conditions begin to tighten again. This is going to start to undo I think a lot of the rally that you've seen in the equity market And I think this was probably a little bit over even an oversight that I probably missed as well when trying to assess the market from The 4200 breakout not really grasping the idea that financial conditions had eased that much and was providing a tailwind To stocks over this period of time And when we look more directly at the S&P 500 here, you can see a little bit of a breakout Potentially above the the trend line and here's your trend line off the October low This is served as resistance and support now a number of times And I expect that it likely continues to do so you can also see that we now have for the first time a bearish Divergence on the S&P 500 something we haven't had in a while where you have a high here And a high here But now you have a new high and a lower high here And I think this is important because the next big level of resistance for the S&P comes around 4510 And so that's not much higher than where we are now and then of course the next level after that 46 and a quarter So this next zone between 44 and a half and 4500 is going to be important to see if momentum Continues to carry the S&P higher and above 4520 or whether or not this proves to be a topping process with Financial conditions starting to tighten again as rates would begin to move higher You can see also the same thing on the NDX when you look at the NDX you can see we're just a hair below the seventy-eight point 78% retracement level Also, you can see that the NDX did not make a new high on fry on on the half day Monday And also you can see that for the first time you're really seeing the momentum potentially begin to shift What is interesting too is when you look at the composite index This actually is only at the sixty-one point eight percent retracement zone And so it hasn't quite and got as far as the actual NDX and also you can see that Momentum here is beginning to show some signs of fading and Obviously if you begin to see momentum fade you're looking at Support levels in the NDX that are going to start coming at around this 14,700 area with a break of those levels potentially setting up gap fills to lower levels 13,600 or so while on the upside this is really a big resistance zone that goes back to these highs on June 20 February 2nd of 22 and March 25th of 22 and This is important because a clearly a break of this resistance zone Sets up a retest of this area around 16,000 and potentially even challenges the all-time highs Which is sort of hard to believe and imagine considering that in this period of time rates were at zero percent And today we have rates that are hovering on the long end of the curve around four percent with real yields at two percent Certainly that equity risk premium