Wednesday's Market Minute: If Rates Fall In A Forest...

… but bonds, gold, and stocks aren't there to hear it, does it make a sound?

Yesterday, Fed Head Jay Powell waxed dovish once again, promising to keep the expansion going, add to the central bank's balance sheet, and again hinted that economic drag from outside the U.S. could justify another rate cut. The market’s response wasn’t much more than a whimper. Stocks were preoccupied by U.S./China trade rumors, bonds and gold ticked higher but failed to break the high of the session, and expensive momentum tech names (TTD, AYX, TWLO) – one corner of the equity market that typically revels in lower interest rates – ended the day down big. The question we’ve been most interested in this past week is why bonds and gold, the hallmark trades of this year’s Central Bank-driven rate reversal, have yet to make new highs despite a slew of bad U.S. data, worsening U.S./China vibes, and rate-cut expectations back above 75% for a cut in October? Not to mention, CFTC positioning behind each is the most net-long of the cycle.

So why no new highs? The easiest explanation stems from the tenets of technical analysis: that price is telling us incrementally bullish things for bonds and gold need to happen for new highs. What would those bullish things be? If it’s not a dovish Powell, then even worse economic data, or a fallout in the trade war. If neither of those happen, this trend may have turned.

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