Eye on Yield Ahead of Fed Meeting
By
Mike Paulenoff
Good Wednesday Morning, MPTraders! September 20, 2023, Pre-Market Update: It's Fed Day! Jay Powell & Company will attempt to address and manage economic growth, inflationary expectations, and the approach to monetary policy for the upcoming months. Fed actions and Powell's presser statements likely (hopefully) will elicit definitive equity and bond market responses from algos, traders, and investors.
Yes, that is the expectation, even though investors approach today's FOMC meeting with a near-zero chance of a rate hike.
With that in mind, all eyes and ears will be trained on Fed clues about its outlook for the final three months of 2023, whether or not the equity indices will experience a Q4 rally into year-end, and whether bond YIELDs will take a breather...
What, if anything, is the technical setup in 10-year YIELD telling us about the forthcoming reaction to today's Fed statement and policy prescriptions? In a nutshell, YIELD has unfinished business on the upside that projects next to 4.50%-4.70% unless YIELD plunges and sustains beneath 4.16%.
My attached Daily Chart shows that the dominant 3-year uptrend (from 0.40%) remains intact and cuts across the price axis in the vicinity of 3.85%. The Chart also shows the nearer-term uptrend from the April 2023 corrective low at 3.25% remains a powerful influence on YIELD direction, which cuts across the price axis in the vicinity of 4.16%-- and must be violated to inflict ANY initial reversal technical damage to uptrending benchmark YIELD.
Technical Bottom Line: My technical setup in YIELD argues for still-higher benchmark 10-year interest rates in reaction to whatever the Fed does and says later today. To my mind, such a reaction suggests that bond traders will interpret the September FOMC policy prescriptions as "not hawkish enough" to satisfy the bond vigilantes, who remain very concerned about inflation (Oil prices?), and who do not want the Fed to pause or otherwise adopt a wait-and-see approach...
(Next Up: Equity Futures Indices)...
