 Hey everyone, this is Mike Kramer of Mock capital today is Tuesday October 10th. It's around 6 30 New York time US markets are closed for today. So tomorrow we're gonna have a very busy day actually with the PPI report coming at 8 30 a.m We're looking for a month over month increase of 0.2 percent in line with last month X food energy and trade We're looking for 0.2 percent Year over year final demand. We're looking for 1.6 PPI core. We're looking for an increase of 2.3 percent year over year up from 2.2 PPI X food energy trade year over year. We're looking for 3 percent in line with last month's Reading then at 2 p.m. We're gonna get the FOMC Fed minutes. We'll go over that in a minute Additionally tomorrow at 1 o'clock you're gonna have a 10-year treasury auction This is important because of the what we've been seeing in the action the treasury rate We're gonna want to pay attention to here is the high yield rate Where that comes in at versus where the market was trading at before The three-year auction today tailed which means that it came in above where the market was The one issued was trading around 472 priced at 474 Bid-to-cover ratio came in sharply lower than last month. And so these are important Ratios to be watching the high yield bid to cover indirect acceptance measures Foreign demand, you know the lower the numbers for indirect and the bid-to-cover ratio The worst the demand outlook is And of course, you're gonna want to again pay attention to where the high yield rate is and you can do that by just looking at where the 10-year is trading roughly Ahead of the auction So that will give you a sense of whether the auction is good or bad and this is important Largely because we're also going to have the Fed minutes at you know at 2 o'clock Like I said, we'll talk about that the Fed minutes You know, I don't think there's really going to be much of surprise in there Many of the FOMC Committee members now have come out and they've talked about you know, either being close to or maybe one more rate hike Still in the equation, but I think really the The key here is going to be in terms of You know the length of time that they think rates are going to have to be held high And what I would pay attention to specifically is is whether or not these minutes Reduishly and more importantly how the back of the yield curve acts because a lot of the movement We've seen in the 10-year rate specifically has come More recently since the FOMC meeting if we look here, this was the date of the FOMC meeting and Basically yields broke out that day And above 435 and we've advanced to around this 470 level The the 10-year rate did drop pretty sharply following the conflict in israel And that seems natural given that there's a little bit of a flight to safety given the uncertainty there But I think what's going to be important from here is obviously how the 10-year rate Acts going forward and I think if you get sort of this dovish message out of the FOMC meetings I would particularly be paying attention to Where rates go do they go higher or do they go lower on the back of the curve? My inclination has been that the more dovish the fed has seemed The more we've seen rates on the back of the curve go higher I think to compensate for the lack of the feds pushing through with more rate hikes I think because you're seeing Atlanta fed GDP Basically modeling out the Atlanta fed GDP now forecast is suggesting that we see third quarter real GDP of about 5.2 percent, which is a really Unreal GDP number for this part of the cycle, especially given how much we've seen in terms of rate hikes already and Additionally what it implies is a very strong U.S. nominal growth rate of about 8.9 percent It also represents about a 4 percent PCE on a quarter over quarter seasonally annualized rate And so this is important stuff and and because if the market's perception is is that the fed is You know kind of pulling back at the wrong point in time where the market doesn't feel the fed is being restrictive enough Then you're going to see tenure rates eventually move higher and take out these highs And so I think it's really important to watch Uh specifically, you know how tenure rates trade going into the print After the auction and then what they do after the fomc minutes because again, you know Typically when you see these big type of moves and gaps and the monday the market was closed for columbus day Here in the u.s. And it wouldn't really be all that surprising I guess to see the You know the the actually the tenure rate trade higher and and maybe try to revisit You know this level up in here around 480 in fact It almost looks like you're seeing that kind of form already with what looks like a diamond reversal pattern Potentially forming down here and it would make sense given the straight line drop to see a big advance in the tenure rate Back up to this 480 level because I don't think that really we can conclusively say at this point that rates have really peaked Especially given the type of acceleration we've seen in the u.s. Economy Additionally when we look at the 30 year rate again, it's fallen to about 4.8 percent but this is a level that we have that we've just recently reached and Again, we kind of stopped going down around this 480 level which is uh important because the 480 level Uh on some of my charts. I have it marked uh more clearly But on the 480 level you can see here is a big um level of support and resistance That goes back a pretty long Long time. Uh, you can see how important it was now three times in a row four times Going all the way back to 2009 This acted as a key level of resistance and breaking above it. I think is very significant And holding that level. I think is very significant Also, you can see here that we just have held a 10 day exponential moving average And it's been a fairly important number that we've traded around On a couple of occasions and when we have gone below it, it hasn't been for more than a couple of days So I would watch this level here if you break 480 I think it opens the door to further declines on the back of the curve But again, just given where the economy is and I have a feeling that we're going to still see rates going higher So I would just watch to see how these two things kind of progress. There will be a 30 year auction As well on on thursday and then on the two year rate It seems like at this point, we're just kind of trending sideways I don't really know that there's much upside left here for the the two year I think it's more likely than not that the two year is probably going to be remaining anchored Around this 5% area Just because again, um I don't really know that the Fed has really much more to go Here on the upside and it's really going to turn unless we really see Inflation really starting to beat numbers to the upside and that's just not the case at this point So I think resistance still kind of remains at 510, you know Clearly if we were to break this 495 490 region that that sets up to a further decline To around 475 or so, but I think we're more likely than not to stay around this 5% region And again, this is important because what we've seen a lot of Over the last couple of days is yield curvery steepening with a bear steepener where you basically have the 10 year rising to the 2 We rose right up to this negative 25 basis points, which had been a level of resistance and support now for some time In fact, if you go back and you look I have this marked off You can see that this sort of was the low back here in 2006 and so again This is sort of important and it almost looks at this point like we formed a double bottom in the in this 10 minus 2 spread at least on the weekly chart and we look at it on the daily You can see it certainly has what looks like a double bottom here And if you put this in and put them together that would be a double bottom so This is an important level negative 25 basis points because clearly this could serve as your Neckline if this is a double bottom here, which will break out probably pushing us up Towards zero percent now the way in which that happens may make a big deal Right because if it's a two-year rate falling to the 10-year rate That's going to be more indicative of a recession if it's a 10-year rate rising to the two-year rate That's going to be more indicative of a bear steepener, which is more about The stronger economy fed keeping rates higher for longer And that's why I say it's really important to pay attention to how the market responds Following the Fed and that's another this is another reason another aspect why I think Rates on the back of the curve here in the us are going to continue to push higher You know, we've talked about the euro really getting beaten up against the dollar It's basically been since uh july 18th that the euro has just been down in a straight line It did break this um This downtrend which I think is important. We have talked about the euro being, you know, very oversold at points trading below its lower Bollinger band certainly that's been uh alleviated to some degree where certainly the The rsi has moved back up into the mid fifties You've seen the the the euro trade back up to the 20 day moving average on the Bollinger band So again, this is a big level because again, you can see we got up to around the 20 day moving average And that's where we failed we got up to the 20 day moving average here and we failed And so now we're back at the 20 day moving average and you're going to want to see Whether we can push through or not and get to this 106 35 region Or whether or not the 20 day moving average is going to serve as resistance again And we're going to see us come back down Uh back to this 105 20 area and maybe retest Uh release retest is breakout which isn't unusual which could lead to a drop back to around 105 01 or so and and when we look at the british pound It's really not much different We talked about it being oversold with the rsi rsi now well back into the mid fifties also at the 20 day moving average Which has been an area of uh resistance at times So again, this is sort of an important level here 122 123 ish because there's room to rise probably to around 123 60 Uh again, but if you get rates that are going to start really moving up on the back of the yield curve and the spreads between, you know, us and german or us and UK rates really start continuing to to widen That's going to basically keep, you know, the euro weakening versus the dollar And that's basically going to keep the pound weakening versus the dollar and you can see that The relationship has gotten all the way back to the upper end of the range But there's all there it could go much further as it did was the case back in 2019 So it's not entirely impossible that this relationship can continue to um move up and you're seeing You know something similar with the british 10 year and the us 10 year With this big rebound and this is part of the reason why you've seen the dollar strengthen so much against these two currencies If we look really just quickly at the dax it had a very big day today There's rumors going around That china may begin to restimulate the economy by running a budget deficit or But again, you know, these are all just rumors. So you have to take it with a grain of salt Obviously the german economy has been highly levered to china. We've known that now for some time Uh, and so I think at this point, you know, the big level here to watch is this one is this 15,475 area It's certainly possible that if we can get above this level, um, that could reopen the door To maybe move higher again to more significant levels, which could even lead back to a gap fill But there's a lot of resistance along the way You can see that we have this down trend in place Which has been here now for a while. It's been tested even a couple of times and failed So this is a major level of resistance. This is a major level of resistance So again, uh, if we don't pass this region around 15,450 or so And you break 15,300 That's going to result more in this decline back to 15,140 or so with another gap to fill down here. So Again, this is a somewhat big level that you're going to want to watch for tomorrow And most importantly, you want to see real follow through You don't want to just see a one day rally and then it comes back in Um, to really make a decision in terms of more the long term But in the short term again, this is a pretty powerful area of resistance. I think So I would be watching, uh, this region in here and I would be watching for a breakdown In there. I mean, certainly when you look at, you know, the DAX it was oversold It's not so much anymore When you look at the footsie, um, again, it's flirting with this trend line Unable to really give us a decisive Um decision in terms of what it wants to do again A lot of miners in the footsie 100 one of the reasons why you saw a big move today Obviously china stimulus would be good for them. And so you got a big pop there. But again This has been, uh, you know, the thing we've been talking about now for some time and we just continue to ping pong What's interesting here is that you you're still making lower highs In in a way if you don't count this but you're making now all of a sudden potentially a higher low And what this tells us is that we're just consolidating at this point with really no clear direction And so again, your resistance level will remain somewhere around the 76 76 area with your downside support Still at 7300 without really being the the major area to watch So I would pay attention to headlines out of china regarding stimulus And I would be watching these levels So anyway, I hope this video helps you and we'll talk to you again soon. Bye