Same here…been pairing down last week and will probably finish most of it in am in trading account…..fear is a terrible thing to trade against..see you guys in the am….

Biden didn't announce the Tuesday speech until after he got that 6th Circuit ruling Friday late about being able to enforce vax mandates on companies.

Expect his speech Tuesday to be about how omicold is out of control, and announce lockdowns starting in Janaury. Also expect flight travel restrictions (vax or can't fly), and probably some other covid ******ness that the blue state governors will immediately implement.

And expect for it all to spook the market.

I'm starting to lose faith in Santa

Santa isn't real. Rip the bandaid off.

I'm eating some losses this morning in my trading account. Basically scrapping most things and starting over. Start over with what's left and try to revive it.

Wild Risk Off Ride to Start the Week...Catalyst Manchin/Covid/Fed Rethink

So much for the Christmas Rally... We thought we might see a bounceback after last weeks tough equity moves... But the Manchin surprise back off, which we question the timing of, has led to a risk off move across the globe in many equity markets and economic sensitive commodities... S+P futures were down about 80 points at 4 am... And 10 year treasuries had rallied to the next resistance of 1.35.. But both reversed... S+P is now down 50 while 10 year treasuries have backed up to 1.39...

Covid cases continue to accelerate at a rapid pace, doubling every few days... We can see panic as long testing lines are through most of the US... In Europe we sense it is worse with many countries implementing lock down type restrictions... The Netherlands being one of the latest... Even Davos, the center of the top thinkers of the world, has just cancelled their January meetings... Whether one believes the fears or questions the severity, things are closing and that will affect economic numbers... Oil is off over 3% this am.

Rates... Rally is coming from the front end as the market is starting to reverse what the Fed said they do the next two years... The front end of the US curve, both 3/5's, are lower in yield by 3+ basis, while the long end of the curve is up marginally... 5/30, which got to 54 recently, is now back to 66... We think the flattening trade is dead for now and expect to see some more steepening... European rates are flat to lower.

The Fed... Traders spent the last few days reversing some of the Fed dot plots... The FOMC forecaste overnight rates jumping from zero to 1.60 and 2.10 by year end 2023 and 2024, respectively. Eurodollar futures, as of the close Friday, had priced in just 1.50 short term rates on both dates...Meaning they do not believe the Fed will be as aggressive as advertised... Governor Waller late Friday suggested the Fed should consider balance sheet reduction at the end of the first quarter next year, which would mitigate the amount of rate hikes... This is technically called sequencing, for those that have asked us..

Inflation... Still the biggest problem out there from the Fed's perspective... We read many views over the weekend... Some like Larry Summers and El-Arian do not think the Fed did enough... We guess they want to see rate rises sooner than March...Others think the Fed did too much and will not be raising rates nearly as much as they laid out... Our view is that while the word transitory has been retired, there are those at the Fed who still believe that inflation will reverse on its own... We do not agree with that view, but that is how the market is reacting...

Manchin and BBB.. While Joe Manchin walked back his support for BBB, we watched his body language... We think it is a negotiating play and some compromise will be done in January... As currently created, we think BBB tries to do too much and is not properly priced...no one believes programs will end after 3 years... Once the bill is properly priced and streamlined, it will pass...

We wanted to incorporate more of the weekend news, but the Manchin move on Sunday, along with the Goldman Sachs cutting their first quarter GDP forecast in half and the respective market reaction, has caused us to eliminate more of the end of the year thoughts... We will write another longer update mid morning... Suffice to say, with the Fed pivot, the removal of the BBB from economic calculations , and the fear that the Fed put is no longer,...expect to see another choppy risk off week... Our view , whether you believe the Fed outlook or not, is that they are still easing, at least until the end of March.. And the put is not dead, not for a long shot... But one has to be careful of the entry points...Nasdaq futures, at the low this morning, were 7.5% off its high from November 30... S+P futures hit down 4.5% from their 12/16 high

If this dumbass does require vax to fly domestically then airlines likely to get killed.

hedge said:

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Good buying opportunity

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Depending on your time horizon. A lot of people, like me, will refuse the fake vax and won't fly. Combine that with rising fuel prices, they could stay depressed for awhile.

Great stuff as always, thanks for posting.

Manchin, from what I hear is done with the dem party and will not even negotiate a trimmed BBB. Time will tell though.

FJ43 said:

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Be careful gents.

Cash is a position.

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I think I may have to listen to this advice today. Yikes.

Brandon!

Market is oversold but don't be stupid. It's just a bounce if it does.

Can't let biases and beliefs impact your trading. Have to go into trading completely neutral to everything. If you go in one-sided, the market will make you pay

Dan Scott said:

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4550 hit. buying the dip

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Stop loss has to be 4500

PearlJammin said:

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This is the Democrats opportunity to punish red states. They will capitalize on it.

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Except that the red states have already told the Biden administration to pound sand. Biden needs to tread carefullly. The final nail is already in the coffin for the 2022 midterms. Does he really want to load it with cement and drop it in the ocean now? Manchin is livid with them. Biden can't get his agenda passed and if he tries to lockdown of sorts, that might just give some other senator the clout to say it isn't just Manchin.

Backdoor