“I used to think that if there was reincarnation, I wanted to come back as the president or the pope. But now I want to come back as the bond market. You can intimidate everybody.”

— James Carville

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Early, short note …

The focus continues to be on bonds, as the US Long Bond yield hit a 24-year high:

24-years ago the second part of Lord of the Rings: The Two Towers came to cinemas. And Star Wars: Episode II – Attack of the Clones. And Ice Age. Eminem’s “Lose Yourself” was number one. As were Kylie Minogue’s “Can't Get You Out of My Head” and Enrique Inglesias’ “Hero”.

Only two of my four adult children were born at the time.

You get the point - it’s been a while.

It is maybe therefore even more astonishing how resilient (or ignorant?) the equity market has been.

Whilst the S&P 500 closed down, it is really “hangin’ on in there”, less than 2% from a new ATH:

But don’t be fooled. We need the bond market to stop its bleeding at least temporarily for equities to continue higher or, worse, avoid the meltdown we (I) have “planned” for next year …

Today is the first of three consecutive days of important economic data in the US (see table below), which could bring some relieve … or not … ADP Employment numbers, PCE, GDP are just a few of a heap of numbers, followed by ISM readings tomorrow and BLS employment data Friday.

Stay tuned, and, May the Trend be With you!

André

Today’s chart is probably not helpful to make you more cheerful about the future of the equity market, but, as they say, it is what it is …

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“He who laughs last, laughs best.”

— Proverb

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Even though there is plenty to write about, I will need to keep it short and mostly factual here today, as I am heading into an 8 a.m. meeting in a few minutes.

As today’s subtitle of The Daily Q suggests, FOMC Chairman Kevin Warsh’s decision to hike interest rates and keep an underlying hawkish tone was somewhat vindicated yesterday, as the S&P’s PMI Composite showed the highest post-pandemic reading and came in well above economists’ consensus:

(US) Interest rates shot higher, with the 10-year reaching at 5.13% its highest reading since 2007:

Of course, did expectation for further rate hikes as implied via futures markets also increase again:

HOWEVER, and this is important, the rise in yields yesterday came on the back of strong economic growth expectations (remember, PMI is soft data, i.e. survey based, not hard data) and not from increased inflation expectations.

This is not least expressed via the following chart, which shows that Real 10-year yields (nominal minus inflation) are now higher then 10-year inflation breakevens, i.e. market-based inflation expectations (nominal yields - TIPS yield):

BTW, we should have known, that strong economic readings were lying ahead. After all, the Atlanta Fed’s GDPNowcast indicated a growth rate of 5.1% recently:

Equity markets’ knee-jerk reaction was to focus on the prospect of higher Fed Fund rates first, rather then the astonish growth and the major benchmark indices retreated close to 1%.

Here’s the S&P 500 for example, where, if the current level can hold today, not all hope is lost for the bull trend to continue:

Importantly, similar to the previous two sessions, when markets headed higher but participation was, well, meh, in yesterday’s “sell-off”, the loser-to-winner ratio was also only about 3:2.

And from a first glance at the market map, it feels like the winners of the previous two sessions were the losers yesterday and vice versa:

Asian markets are mixed this morning, with the Nikkei being one of the advancers (+1%). This index is about to nullify the trend reversing shoulder-head-shoulder pattern we have previously discussed with a move above the dotted line:

And as we know, there is nothing as bullish as a failed bearish pattern 😜

What else?

The US Dollar gained on the prospect of higher US rates, with the US Dollar Index closing in on the July highs and hence endangering our bearish outlook once again:

Dollar up probably means Gold down:

Indeed! Watch that support at 4,230 (dashed line) closely.

That’s all for today - have a great day, and,

May the Trend be with You!

André

The Roundhill Magnificent Seven ETF, which tracks the performance of the … well, you know … showed a nice, clean break out of its multi-month consolidation pattern, not least on the back of a very strong performance by Meta:

That previous resistance at roughly $71 has now turned support and may become a major testing ground for the current short-term bull run of the overall stock market to continue.

Stay tuned …

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“The future is already here — it’s just not evenly distributed.”

— William Gibson

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Just two, three charts today after yesterday’s massive rally on (US) equity markets, but a (I think) nice trading idea in the Chart-of-the-Day section.

For some reason, investors decided to interpret all news positively yesterday pushing the S&P 500 out of its consolidation period of the past weeks:

The final confirmation would be reaching a new all-time high (ATH), which is only some 30 index points away. But note, the mini-futures version of the index has already achieved that feat:

Participation was broad(ish), with three stocks up for every stock down, but the heatmap reveals that this was mostly a tech/communication stocks rally:

Which is also reflected in the nearly three percent jump in the Nasdaq then:

Hence, we need to see some follow-through the rest of this week, plus also a broadening out to other sectors.

Perils to the rally are manifold, with

• Fed governors being given microphones this week to comment on last week’s hike,

• the Iran war sounding closer to re-escalation than resolution,

• US stocks being in buyback-blackout period,

• and Trump and Xi meeting later this week (Sep 23–25).

Stay tuned …

The following chart shows relative 100-day price returns for the group (using the XLI ETF as a proxy) versus the S&P 500 from 2010 to the present. When the blue line is above/below the x axis, Industrials have out-/underperformed by the number of percentage points shown on the y axis.

In other words, the probability of industrial stocks (XLE) to further underperform the S&P 500 (SPY) are low and there is a good chance for a relative outperformance.

I would consider the First Trust RBA American Industrial Renaissance ETF (AIRR) to express that trade.

Being down 30% since it late June all-time high,

it seems to offer an interesting entry opportunity given the long-term context of this correction:

These are some of the top holdings in the ETF:

Probably not your household names.

Trump and Xi are meeting later this week, but before some of the FOMC-boys and gals are feeling the urge to talk. Let’s see what they have to comment regarding last week’s hike:

May the Trend be with You!

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“We hold these truths to be self-evident…”

— Thomas Jefferson, Declaration of Independence, 1776

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The Fed (or technically the FOMC) declared its independence from The Don last night. In summary:

• The FOMC unanimously decided to raise the target range for the federal funds rate by 25 bps.

• Ÿ The Committee’s projections showed that they anticipate another hike before the end of the year, before remaining on hold through 2027.

• The new set of economic projections essentially showed a new reaction function with a much higher policy rate trajectory needed for a similar inflation outcome. This was underlined by an upward revision of the neutral rate.

The Spokesman-in-Chief of the Empire did of course not take long to react to this declaration of independence:

But being in the awakard situation of having appointed the leader of the rebellion himself, he of course offered Warsh an off-ramp little later.

When speaking to journalists, he first acknowledged the revolution,

but then offered the rebel-leader to pull the his head out of the sling:

Anyway, equity markets first reacted positively to the rate hike, still believing in “one and done” but then started to turn sour during the press conference, albeit recovering by market close and beyond. Here’s the S&P mini-futures chart:

Given that many market observers expected a dovish hike, i.e. a hike but dovish speech, but in the best case got a “two and done”, a “buy the rumour, sell the fact” never happened and rates continue to raise post the announcement:

One of the main movers and gainers was the US Dollar, which profited from the unexpected ‘hawkishness’. For now, this has pushed the DXY above 100 agian:

Especially the Euro has been weak versus the Greenback, pushing the cross-rate below the 50-day moving average AND below 1.15!

Finally, Gold has been able to recover after an initial sell-off shock:

That’s all for today - May the Trend be with You!

André

A maybe useful roadmap to the US mid-term elections from BofA below:

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“Sell Rosh Hashanah, Buy Yom Kippur”

— Wall Street Adage

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Over the past two weeks we observed on several occasions how some asset were at the brink, or, in other words, at a tipping point.

Without a lot of tam-tam, those tipping points have now partially been exceeded. To the risk takers favour, they have done so without sparking panic (yet).

Let’s have take a leisure walk down chart lane, but let’s be careful where or what we step on …

Today’s Quote-of-the-Day, “Sell Rosh Hashanah, Buy Yom Kippur”, is an old Wall Street adage, and has its roots in both religion and seasonality. Decades ago, Wall Street had a large and active Jewish trading community, and observant traders would step away from their desks during the High Holy Days to pray and spend time with family. That meant lower volumes and thinner liquidity, which could leave markets more vulnerable to weakness. Add the fact that Rosh Hashanah typically falls in September—historically a rather unfriendly month for equities—and a market proverb was born. You can read more here and here.

This year, in the adage sense, so far so good, with the S&P 500 now having closed below the 50-day moving average:

Humans (a race I consider myself part of - most of the time) have a tendency to wanting to see patterns, even if they are non. My pattern filter is saying there’s more work on the downside on that chart above.

Similar on the Nasdaq, where a four percent rise would be needed to break the pattern of lower highs:

The small-cap cohort (Russell 2000) has some additional suffering, given the likely Fed Fund hike later today:

As I highlighted in our weekly tome (click here), apart from seasonality, AI-build out pause fears, deterioating breadth, higher bond yields are clearly also exerting some pressure on equities. Whilst we may see some buy the rumour, sell the fact on yields (inverse on bond prices), post the FOMC-decision tonight, the 10-year yield continues to stubbornly stick around the 5%-handle:

Odds for a rate hike this afternoon, as implied via Fed Fund futures are now at 94%, AAAAND, odds for two rate hikes at above 100%:

This “one now, a second before year-end” view is also confirmed by most central bank watchers around the globe:

And then there’s of course also the Bank of Japan (BoJ), which is also expected to hike at least 25 basis points later this week:

Only yesterday the 10-year JGB yield closed above 3% for the first time this cycle:

Staying on Japan for a moment, the country’s currency has been consolidating some of its recent gains:

But longer term the tide seems clearly to have changed (for a stronger Yen, i.e. lower USD/JPY on the chart below):

Gold is holding above its 50-day moving average, having suffered under the expectations of a FOMC rate hike today:

Will we also get a “sell the rumour, buy the fact” relief-rally here?

Stay tuned …

Using the past seven tightening cycles as a guide, GS notes that the S&P usually struggles at the start, falling an average of 2% over the first three months. The pinch typically does not last long, however, with the index gaining an average of 9% over the following 12 months. The bruising exception was 2022.

All eyes on … press conference following the 25 basis points rate hike decision! Let’s see how Warsh will sooth Uncle Donald … he may just turned into a “Home Alone” Kevin …

May the Trend be with You!

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“And when you gaze long into an abyss, the abyss also gazes into you.”

— Friedrich Nietzsche

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Just a few key observations - speed round so to say…

(US) Stocks ended down for a third consecutive session, bringing the S&P 500 back closer to “the Brink” we wrote about a week ago:

Only one out of the eleven sectors closed up on the day, and it was probably not the one you were hoping for:

Because with only energy stocks we have a suspicion on who the Strait of Hormuz thingy is going and what it means to oil prices:

Yup. But not only crude is trading at a multi-month high, refined products are at multi-year highs and in the case of Diesel it is scratching at the ‘record’ highs of the beginning phase of the Ukraine-Russia war:

But, back to stock for a second, where breadth on the broader stock market (NYSE) seems to be tipping over:

Suddenly, we are also observing more new 52-week lows than highs:

This is also true for the European stock market:

Speaking of which, European stocks (SXXP) produced a nasty short-term breakdown yesterday:

All this whilst bonds continue to sell-off too, as much in the US:

As also in Europe:

Heck, a global ‘phenomenon’ really:

Gold broke above the downtrend line from the short-term consolidation channel, which could initiate the next upleg:

Diesel prices are much higher than they usually are at this point in the season.

Biting my nails for Friday’s CPI …

Today it starts to get interesting! ECB (hikes) at 14:15 and US PPI shortly after.

May the Trend (and guts) be with You!

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

「待てば海路の日和あり」

Mateba kairo no hiyori ari.

“If you wait, fair weather will come for the voyage.”

— Japanese proverb

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Could it be? Could it really be true? Is the Japanese Yen suddenly rallying meaningfully without help of mother Japan or Daddy Yankee?

The chart of the USD/JPY would make us indeed believe so:

So, are we now suddenly looking at The House of the Rising Sun Yen?

Perhaps.

As we outlined in Monday’s Quotedian “And Then There Were (N)One” (click here) a second (or first) order effect may be that the Swiss Franc (CHF) is now the only real global funding currency left. This in turn, could lead to some more Swiss Franc selling. The purest way of expressing this view would of course be shorting the CHF/JPY cross:

Let’s keep an eye on the chart over the coming months to quarters…

In other markets, stocks had a weak day again yesterday, which according to this little statistic is apparently ‘normal’:

Hence we deduct from the table above that today, on average, should be more positive for (US) equity market returns.

Perhaps.

In any case, we keep an eagle’s eye on that 7,630 support level (mini futures ‘ES1’):

In any case, the ignorance resilience of stock markets to higher bond yields remains astonishing. The chart of the US 10-year Treasury yield below is screaming for an imminent break higher:

Couple that with an again ‘soaring’ oil price, where Brent is flirting with the $100 level, and it makes equities’ incognizant behaviour even more … hhmm…. interesting:

Gold, which we like, is attempting to break out of that short-term consolidation pattern as I type:

Zooming out on the same chart, we note the danger of a shoulder-head-shoulder pattern developing, with a break of the neckline at 3,980 having VERY bearish implications (PT 2,600!):

However, this is clearly our low-probability outcome scenario.

Last, but definitely not least, Dr. Copper is breaking out to new all-time highs:

Which is probably a combination of a strong economy (see UST yields) and a supply-side issue. Stay long.

The chart below argues that “in theory” low capex, hyperscaling Tech companies are now spending more on capex than those very capital-intensive mining companies:

The lines are built from the 10 largest stocks in each sector and of course are tech stock muuuuch bigger than mining companies, but still …

Not too much excitment on the agenda today - everybody and his mother (except Warsh) waiting for tomorrow’s PPI and Friday’s CPI.

May the Trend be with You.

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“Things fall apart; the centre cannot hold.”

— W. B. Yeats, The Second Coming

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On the brink. That’s how the world feels right now.

From a geopolitical point of view and on the brink from a financial markets point of view.

In geopolitics, Iran and the US are going at each other again; Germany is blaming the drone attacks at Leipzig Airport on Russia; the FT reveals that Russia may be helping Iran to develop supersonic missiles; Turkey and Israel are exchanging niceties over Syria, and the China/Taiwan story does not seem to go away ever. On the brink.

In financial markets, emotions are running hot over hot-running bond yields; oil prices stubbornly refuse to go lower, and equity markets are suddenly on shaky legs. On the brink.

So, whenever emotions start taking over, it is a good idea, at least on the financial market analysis side, to dust off those charts and take a dispassionate, almost stoic view of things.

(Spoiler alert: It doesn’t get much better).

The focus continues to be on the bond market, where waking this morning we notice the highest level on the Tens since the October 2023 peak:

This is now, of course, way above Bessent’s “you shall not pass” level of two nearly three weeks ago:

And ditto now for the 30-year yield version too:

But of course are the US bond yields not the only ones reaching new cycle highs. The entire long-end of the Japanese curve is pushing relentlessly higher:

In the Eurozone, proxied via the German 10-year Bund, yields are have put in a five-day, take-no-prisoners march higher:

Here we are talking suddenly of levels not seen since the European Sovereign Debt Crisis back in 2011:

And if you dare to take the French version of Eurozone debt, you are paid nearly a percentage more!

No wonder then, that those previously seemingly stock market legs suddenly look a bit more wobbly.

The S&P 500 is about to close that gap we have been pointing to at 7,600:

When looking at the S&P 500 mini futures prices this morning, this seems a foregone conclusion and the chart looks pretty top-heavy, with a fall below support (previous resistance) becoming likely:

Simultaneously, market breadth has been showing signs of weakness, with the advance-decline ratio (bottom clip) have started to turn lower:

And it does not help either that we are moving into the “hot period” from a seasonality point of view, especially during mid-term election years:

The technology-heavy Nasdaq looks even weaker, with the recent lows of August 24th (dashed line) likely to be tested later today:

In Europe, the broad STOXX 600 index (SXXP) closed below its 50-day moving average:

Not a definite sign of an end to the rally, but, on the brink… a 5% pull-back to the 200-day moving average (black line) has just become more likely.

In currency markets, all-in-all the US Dollar is holding up “thanks” to that increased geopolitical sabre-rattling, but we still think this is an opportunity to reduce exposure in the greenback, rather than add to it:

99.75 would lend itself well as the next intermediate top on the Dollar index.

Gold’s weakness suprises us, but similar as we believe that the USD is in its latter moments of short-term strength, we think that gold is offering us another opportunity to jump on board here:

This letter has become much longer than I intended, but suddenly there are a lot of things to cover, and yes, I know, I had to forego many markets in order for this not to become gargantuanly long.

As we are in sour mood anyway already today, let me add some more fuel to the fire, or maybe better, add more fodder to the bears. Two charts from Citadel Securities below, both self-explaining:

The important economic number of this week is Friday’s non-farm payroll, but today’s ADP number may already offer a glimpse. Broadcom earnings could be of interest too.

May the Trend be with You!

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“Nothing happens, nobody comes, nobody goes, it’s awful!”

— Samuel Beckett, Waiting for Godot

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NVDA came and went, leaving the analysts’ (or at least my) mouth opening after another stunning quarter of revenue in excess of USD90 billion and net income around the USD60 billion mark:

In. One. Freaking. Quarter!

Initially the stock sold off a tad, though eventually investors’ came to their senses and shares in NVDA are currently up about five percent.

Whilst this is not a name on our focus list of stocks, technically this could be an interesting entry point, with the price holding above the 50-day moving average and the price momentum oscillator likely to head higher again:

One share that IS on our focus list is Crowdstrike (CRWD) and they also just delivered a quarter of blow-out earnings and providing upbeat revenue guidance. We had already last week touted the stock as it was down 20% in one of its ‘typical’ drawdowns:

The share traded at $209, up >10%, after-hours…

Despite initial (red box) market excitement post those good technology stocks earnings (Salesforce - CRM - also delivered solid results), the euphoria started to slide overnight, as worries turn towards tomorrow’s Jackson Hole meeting again. Here’s the post-market close activity of the Nasdaq mini-futures:

Other asset classes, seemed to have now moved into a similar “Waiting for Godot” mode, including (UST) bond yields,

Gold,

and the US Dollar:

One segment worth higlighting, and we already did so a week or so ago, is the rising concern over French debt, below expressed via the French Oat - German Bund 10-year yield spread:

Now at its highest in years, if not decades, we are running into risks of a panic blow-out moment a la 2011/2012. Below, same spread again, but long-term picture:

Not to beat a dead horse, but maybe the following chart of the spread between French and ITALIAN 10-year bond yields is even more telling:

Gold started its bottoming process in late June, with the lowest recorded mid-July and then reinstated its uptrend in early August, with an acceleration post Bessent’s initiation of Operation “Twist & Shout”. Magically, or not, this very well fitted the seasonal pattern of the past thirty years:

Stay tuned (for more Gold gains)…

Today’s agenda (below) is vastly uninspiring, so it is really THE opportunity to enjoy to truly last warm day of summer (at least here) whilst we wait for Godot (aka Warsh).

May the Trend be with You!

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.”

— Rüdiger Dornbusch

Yesterday was a day when it all made sense. Well, or at least as much as financial markets can make sense.

For example, you could look at the price of oil which traded noticeably lower,

and assume that (US) bond yields were lower too:

Or seeing that Bitcoin pushed above 80k (albeit it closed below that level again),

could have led investors to the conclusion that risk was on for equity markets too:

So, with NVDA (and CRWD and CRM) earnings out after the market close today, and then the market preparing for Kevin Warsh’s first Jackson Hole appearance as US Fed Chair, we are maybe indeed living through the calm before the storm.

But before all that, let’s have a quick, closer look at some equity charts, starting with the S&P 500 daily:

We note that the August 4th opening gap has not yet quite been filled, but maybe it never will. On a positive note the index is holding above 21-, 50-, and 200-day moving average for now.

Zooming in on the same via a 4-hour chart, however, we also note that there has been a sequence of lower highs (pointed hands) and lower lows. The index has now a chance to break the pattern of lower lows if it can stay above the dashed line:

Supportive to equities should be that more stocks continue to hit new 52-week highs as compared to new 52-week lows,

on both sides of the Atlantic:

Accordingly, breadth (adv-decl) continues to move in an uptrend:

Little else to mention this morning, other than that Gold is consolidating its recent gains:

Whilst the US Dollar is licking its wounds after the also recent sell-off:

Neither has finished with its up- (Gold), respective down- (Dollar) trend quite yet in our books.

Heading Towards a Debt Crisis, One Trillion at a Time

As aforementioned, all eyes on NVDA today, tomorrow we may be in the eye of the storm, and the Friday Jackson Hole.

May the Trend (and the Force) be with us.

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“You never know how strong you are until being strong is your only choice.”

— Bob Marley

Full Dashboard here:

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First of all, a small apology to the readership of The Q … I have been logging in the dates with a one-time lag this week; e.g. yesterday’s issue read 19/8 i.o. 20/8. I promise, though, that all charts and opinions were up to date.

Let’s see if next week I can pull the trick and be one day ahead!

Also, this is going to be a brief Friday note, despite of everything going on. But we’ll have to have a longer discussion in the next weekly issue, as I am already hopelessly behind schedule today.

Let’s start today again with the bond side of things, as it is what matters most right now.

Probably much to Treasury Bessent’s frustration, yields at the long-end went right back to where they were before is “whatever it takes” pronouncement:

Mr. Bessent, one of the chaps responsible for ‘breaking’ the Bank of England back in 1992, should no better than anyone else, that Mr. Market will come back to test resolve.

Unsurprisingly, he already had his first tantrum yesterday:

• “We’re going to increase the size of the buyback. I would note that it could be more than the $4 billion per issue.”

• “We want to show that yields do not reflect underlying fundamentals.”

• Treasury buyback “could be more than the $4 billion per issue.”

• “Part of it is signaling.”

I recognise a man in despair when I see hear him…

Interestingly enough, whilst bond yields net-net have more or less returned to where they were pre-announcement, other asset classes have not.

Take Gold for example:

Or Bitcoin!

Of course, there must be other forces at work on the crypto segment too, and there are, but we’ll get back to that in our weekly issue.

Stocks continue to be somewhat of a sideshow, though yesterday’s weak results should not be taken ligthly as indication of the state of the US consumer:

The S&P itself gave back a bit less than a percentage point:

A test of that 7,600 level would be technically ideal, as it would enact the previous resistance now support and also ‘close’ that opening gap from August 4th:

It also allows to add a close-by risk reduction (aka stop loss) point to our bullish outlook.

Some stocks we mentioned as possible longs (see full article here), have corrected this week and may offer an entry opportunity.

One perfect example is our long-time favourite Crowdstrike (CRWD):

As I said, waaayy behind today’s curve already, so we’ll cut off here. As always, please feel free to pick up the dialogue via the comment section:

Leave a comment

And also let me know if you would be interested to actively participate in a Substack based chat function, if I were to introduce that:

Have a great weekend, and remember, the Trend is always with You!

André

This, if true, and the source is not just anyone, is scary:

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”

— Mario Draghi, 26 July 2012

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Yesterday, IMHO, was a massive day for financial markets, as the US Treasury (Bessent) published this press release:

Immediately, both sides of the opinion aisle started shouting at each other whether this was or was not a first form of Yield Curve Control (YCC).

Maybe it is.

Maybe not.

But what it is to me, is one of those defining moments in (financial market) history, right up there with Draghi’s 2012 “whatever it takes” or Powell’s 2020 “in the amounts needed”.

Technically, the decision means that the US Treasury will step up its bond buyback activity from USD2billion to USD4billion per round.

However, understanding the exact mechanics of what Bessent's game plan is, is well above my pay-grade, but I think the reliably brilliant Mike Green is on to something when he wrote yesterday that “the aircraft carrier has begun to turn, it is NOT an executed turn.”

His argument, in short: by buying back the longest and most rate-sensitive bonds, Treasury is quietly pushing real yields lower without lighting an inflation fire — and if Warsh follows with a cut, the curve steepens, mortgage spreads compress, and everyone leaning short the long end risks getting run over.

Whether the carrier clears the straits, as Green himself concedes, is another question entirely.

All in all, I am sure it can be ruled out that the action taken had anything to do with this headline out a couple of hours later:

(sarcastic Quotedian-smirk.)

Finally, I insist, USD 4 Billion is not a massive number (what’s a billion amongst friends nowadays anyway). But, I think Bessent just told markets that there is a level of long-term yields Washington is no longer willing to tolerate.

In any case, the Fellowship of The Quotedian will as always listen to the markets and what they have to say.

So, let’s have a quick look at what markets said so far.

As might be expected, nominal bond yields fell, but admittedly (and rightfully?) not by too much. Here’s the US 10-year yield:

The very long end (30y) saw a steeper 10 basis points drop:

Whilst we may not yet label Bessent’s move as YCC, it is probably save to tag it as Fiscal Dominance. And the first victim of Fiscal Dominance seems a country’s currency, in this case the USD. Here’s the US Dollar Index (DXY):

Why so damaging to the currency? Robin Brooks of the Brookings Institution draws a useful parallel with Japan: once policymakers suppress the bond market’s ability to express concern about deteriorating fiscal dynamics through higher yields, that pressure has to escape somewhere. In Japan, the yen became the release valve:

If you artificially suppress risk premia in long-term government bond yields, that obviously morphs into currency depreciation, which is exactly where Japan has ended up. The key signal Bessent sent is that the rise in long yields is unwelcome, but the US is unwilling to address the underlying problem, which is rising debt and a very large deficit.

And where do investors run to when it becomes clear that a currency becomes the pressure-valve of an economy? Correct, the USD!

Oh.

Well, then the next best (better) thing, which is Gold:

Note how the price of Gold is now toying with its 200-day moving average, which we had identified as “next stop” as early as last Monday …

Finally, equity investors were completely forgotten yesterday, and for the time being, that is probably correct. Here’s the S&P 500:

Structurally, it is probably a net-net positive for stocks, especially also those heavy capex abusers, but yesterday the focus was simply somewhere else.

Of course, there’s much more, but we’ll leave it at this for today, as there is already enough to digest. Make sure not to miss next Sunday’s/Monday’s weekly Quotedian, where we’ll surely deepen the discussion.

Sign me up to The Quotedian

I like to say that everything is relative. In live. In health. In finance. Etc.

Our aReS model is built on relativity (I just sounded like Einstein there!).

Yesterday, shares in Moderna were up 176% on the back of successful late-stage trial in skin cancer treatment (hooray!!):

That’s a massive candle there.

But…

Zooming out, we note that everything is relative:

Stay tuned … (and relative).

Germany - PPI

Eurozone - Unemployment

US - Jobless Claims, Leading Index

Earnings - Walmart

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“The impediment to action advances action. What stands in the way becomes the way.”

— Marcus Aurelius

Click on PDF Download below for the full dashboard:

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In Monday’s Quotedian (click here) I probably sounded a bit overly optimistic, which I still am (for the next few weeks at least). However, that is not to say that the road ahead is about as stony as it can get. Many of those pebbles are Strait of Hormuz (SoH) related, but one bigger, more important rock just reappeared and a pothole may lay right behind it:

Yes, bond yields, that’s right. Long-term bond yields, the 30-year version in our chart above, are hitting multi-decade highs. And this, despite ‘benign’ US inflation numbers as we had discussed on Monday. However, as also discussed, the upward pressure on yields probably stems partially from the inflation factor, which in a world of rising global geopolitical tensions, is not diminishing to say the least, but also from the rapidly increasing debt and increased competition for capital via the hyperscalers issuing bonds at record paces.

The US is not the only debt ‘abuser’, but reaching the USD40 Trillion milestone probably this week does make it THE posterchild:

On the equity side, higher yields are taking their toll (at least short-term), especially on longer duration stocks, such as the tech segement. Here’s the Nasdaq:

We have to note here, even though it is currently not our main scenario, that the Nasdaq is at danger of putting in a series of lower highs and lower lows (aka Downtrend):

Stay mindful, I’d recommend here…

The grunt of yesterday’s sell-off was focused on the semiconductor subsector. Here’s the SOX:

That rejection at the 50-day moving average (greenish line) is omnious.

But before we all run out of the building crying “we’re all gonna die”, let’s remember that the broader S&P 500 is a mere 1.5% away from its ATH:

AAAANNNDD, the other thing to remember is that there is always a bull market somewhere.

In that context, Energy stocks (XLE), which we highlighted as an area of interest at the beginning of the week, just hit a new ATH:

Maybe it is still not too late to get a foot, or at least a couple of toes, into that Refiner ETF (CRAK):

Due to time constraints I will skip other asset classes (FX, Commodities) today, but I encourage you to post your question and/or engage in dialog in the comments sections:

Leave a comment

It would be nice to get this community more interactive, or what do you think?

An interesting chart here, which needs little explanation. It shows currently (planned) capex on the AI build-out in percent of GDP and compares it to previous super-projects:

Not a lot on the radar today - at least scheduled …

The market will look at the FOMC Minutes due around 8 pm CET. On the earnings front we already had numbers out from HK Exchanges & Clearing, Geberit and Straumann. Before US market opening earning from retailers Target and Lowe’s may give some insight to the state-of-the-consumer.

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

"Events, dear boy, events."

— Harold Macmillan (former British Prime Minister)

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My plan was not to publish a daily version of the Quotedian until later this month, but as former British Prime Minister Harold Macmillan Said in response to a journalist or questioner asking what is most likely to blow a government off course or knock leaders out of power: “Events, dear boy, events!”.

And we had an (price-induced) event yesterday - remember this chart?

Well:

Time to put the nail polish and beach balls away then and get those fingers back on the ‘buy button’.

Reason for the sudden release of the buying prowress? Well, one main trigger was probably a grown-up (US Treasury Secretary Scott Bessent) saying yesterday that the US and Iran could reach an agreement to open the Strait of Hormuz to "freedom of movement" as soon as "today or tomorrow." This made not only the oil price drop in earnest,

but also lead to this aforementioned rally across (nearly all) global equity benchmarks:

However, I think, and we mentioned this in Monday’s Quotedian (click here), that the rally has also been induced by selling pressure abating after Leopold’s Situational Awareness fund (read about it here) was taken out of the game. This is clearly reflected in the outsized rally in the Nasdaq, which, however, is still a few percentage points shy of a new all-time high:

Opportunity? 😉

Global bond yields also dropped on the back of lower oil prices. Below the US 10-year US treasury yield:

Whilst we remain long-term bond bears, there may be a upside trading opportunity, which we had also highlighted in Monday’s Quotedian. The combination of the iShares 20+ years Treasury bond sitting on its long-term support line,

in combination with everyone and his mother bearish on bonds, as expressed in COT (Commitment of Traders) data,

could lead to a tradeable rally in duration.

One of those charts that makes you pause for a second. The Situational Awareness blow-up sits almost exactly where Long-Term Capital Management unravelled on the Netscape-to-ChatGPT timeline. The grey shading marks the When Genius Failed period.

• ADP Employment data (ahead of Friday’s NFP)

• ISM numbers

• Earnings: Sandoz, Heineken, Infineon, Eli Lilly, Disney, Sandisk, Western Digitial, Honeywell, eBay, AppLovin, Albermarle, and many, many more

That’s all for now - May the Trend be with You.

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

"If it looks like a duck, and quacks like a duck, we have at least to consider the possibility that we have a small aquatic bird of the family Anatidae on our hands."

— Douglas Adams

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Our call for “Rotation, Rotation, Rotation” highlighted in our latest quarterly investment outlook (click here), seems off to a decent start. At least in terms of rotation out of the “hottest” pockets of the market, such as semiconductor stocks, with the Philadelphia Semis index down another 4% in yesterday’s session:

The next stop could be around 11k, which is ‘only’ another 6% away from current levels.

Studying the SOX/SPX ratio, this definitely starts smelling like a duck bubble bursting:

The semiconductor sell-off is of course then also taking its toll on the Nasdaq, where, if the cash trading is as negative as the current futures trading, we have the completion of the diamond top discussed in this precious newsletter yesterday, and which would imply a drop to about 27k (-8%):

The S&P continues to look substantially more constructive, but the current weakness amongst tech stocks was enough to pull the index away from our (in)famous lines in the sand we have been observing and taking as trading guidelines for months now:

It is further important to note then, especially with respect to the rotation trade, that despite yesterday’s half percentage drop in the S&P 500, three times as many stocks were up than down on the day, leaving us with a pretty green market heat map:

Asian markets, with South Korea and Taiwan especially exposed to the Tech/Semi trade, are not offering a picture apt for the faint of heart:

Japan’s Nikkei is now correction hard within its cyclical uptrend channel:

Moving to other markets, US 10-year treasury yields are off their highs of late last week,

whilst European yields (German 10-year Bund yield) continue to push higher:

a final note on Gold, which I feel will drop below key support (lower dashed line) over the coming hours and see some form of capitulation (aka puke selling) in the coming days, after which some shards may be picked up again:

Another “chart of comfort” for our continued bullish view in equities, is the one of transportation stocks in the US. The iShares US Transportation ETF as a proxy for the segment is making new ATH after ATH, indicating that the US economy is running “hotter” than may be assumed:

All in all, this confirms our rotation-theory once again and explains the burstingn of the mini-bubbles in the more speculative segments of the market.

Yours truly is leaving on two weeks break - so unless all hell breaks lose in markets AND i am bored out of my mind, there will be not Daily Quotedian (letter formerly known as QuiCQ) until early August.

Be safe and May the Air-Conditioning be with You!

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

— Often attributed to Mark Twain

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Just a brief update today, reinforced by a small apology for the radio silence over the past two weeks, which has been a very busy period for yours truly, preparing our quarterly investment outlook, which now was published yesterday and which you can find here:

NPB Investment Outlook Q3/2026

In our outlook we take about “Rotation, Rotation, Rotation” and how we expect equity markets to slowly switch from the high momentum/growth corners into higher quality (tbd) stocks.

One expression of this concept was to be well observed yesterday, with the Philadelphia Semiconductor index down around 2% on the session, whilst the S&P 500 close up about 40 basis points.

That divorce between the indices has become now very apparent over the past three weeks:

This then is of course also true for the S&P 500 - Nasdaq spread:

Hence, we get two pretty different longer term impressions on each of those. The S&P 500 continue to move within our lines in the sand, don’t do anything range, but with a breakout higher seemingly imminent:

Whilst the Nasdaq leaves us a much less constructive image:

Those dashed lines in the chart above are actually called a diamond formation which tends to be a reversal pattern, i.e. a diamond top in this case. A break lower could mean another 5-8% downside for this index…

European indices are holding on bravely to recent gains, but also struggle to provide significant further advances:

Switzerland’s (defensive …) SMI may be one of the most constructive charts on the old continent:

Another topic “du jour” or “du année” is of course the Strait of Hormuz (SoH), where tanker crossing has undeniably slowed again:

Suddenly, the US strategic petroleum reserves are a topic again:

The question being, of course, are those numbers even true and is the oil at the bottom of the barrel (figuratively speaking) actually even usable at all?

Today’s chart of the day looks at that optical illusion, that Fata Morgana, that the inflation numbers in the US were this week.

Both, consumer price inflation (CPI),

AND producer price inflation (PPI),

reported numbers not only lower than the previous month but also well below analysts’ expectations (for what they worth…).

However, taking that latter PPI number and excluding energy prices, which we all know dropped dramatically post the ceasefire announcment (and which we also know have turned up again meanwhile), we note that inflation continued to rise also during June:

This reinforces our view that the following chart we have been observing for years and which we just republished in the accompanying chartbook to our Q3 outlook (ping me at ahuwiler@npb-bank.ch if you want a copy), still holds some validity:

Have a great day!

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“Sooner or later, everyone sits down to a banquet of consequences.”

— Robert Louis Stevenson

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Good morning!

I just watched (with half an eye) an interview of a Switzerland Football team supporter, who post the 2-0 win of his team over Algeria, was celebrating that he is unemployed, which allowed him to watch the game in public viewing at 5 am and drink some beers along the way. Good on him!

Similarly, the US equity market, or at least parts of it, celebrated a lower non-farm payroll number (i.e. less-than-expected people found employment in June):

However, initial joy did not last long (as it also will not for our Swiss fan, once the hangover hits), and stocks came under pressure shortly after cash trading opened. Same S&P 500 intraday-graph as above again, but full time line:

The weakness was mostly produced by the tech sector, and within there the semiconductor stocks, which found little love in yesterday’s session:

To add insult to injury (for tech stocks) the Dow Jones Industrial index, aka Papa Dow, actually hit a new ATH yesterday,

leaving a market picture of three speeds yesterday:

As a final comment in the equity section, it is to be noted that breadth was widely bullish AGAIN in yesterday’s session,

at the same time where investors’ sentiment (AAII) was benign,

which reaffirms our view that July will see stocks rally higher:

US bond yields reacted (by going lower) to the weak NFP number initially, but by the end of the session, it was a big fat nothing burger:

A more hefty reaction came from currency traders, which pushed the US Dollar lower, as the outlook for higher interest rates softened. The Dollar Index is falling back to the 100 level, previously the upper resistance of the multi-month trading range, now turned support:

Gold was hence one of the main beneficiaries of real rates contracting and the greenback softening:

There’s much more of course, but this will have to do for today, or else, the QuiCQ would stop being QuiCQ 😜…

This fascinating chart from RenMac below suggest that those waiting for EPS to miss or downward revisions to confirm a top, may be flying right into the side of a mountain, just like back in the year 2000. Prices peaked in March, EPS kept rising into 2001 …

Stay tuned …

With the US celebrating a double Independence Day this year (Happy 250th Birthday!) and therefore bond and equity markets closed in the land of the free, it should be a fairly quiet, low-volume session for other markets.

Enjoy your weekend!

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“Everybody has a plan until they get punched in the face”

— Mike Tyson

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Today’s super-quick QuiCQ is not about ICYMI, but rather ICYMM (In Case You Missed Me). As Mike Tyson famously said in today’s Quote-of-the-Day, we all have different ideas on how our day/week/year/life will go. This is also true for this timid editor of your favourite newsletter, and instead of releasing multiple letters this week, I have been confined to a room with a view for the past few (and next few) days:

But, just to let you know I am still here, here a short QuiCQ, with nothing but a few charts I found interesting enough to share. So, no specific market observations today, just “chicken soup for the chartist’s soul”.

For example, we were all wondering why Chinese Tech (KWEB - KraneShares CSI China Internet ETF) is lagging so much the Global Tech stocks (IXN - iShares Global Tech ETF):

Well, maybe we were looking at the wrong (KWEB) instead of the correct (KSTR - KraneShares SSE Star 50 Market ETF) one:

Another amazing chart is the one of Cybersecurity stocks (CIBR) in comparison to Software stocks (IGV - grey line) and the tech sector as a whole (XLK - red line):

Versus other software stocks, cybersecurity shares are at a decade relative high, whilst at the same time the are close a decade-low versus the general tech sector.

On another note, the USD/JPY hit its highest level since …. drumroll …1986!!

Are we in for another August 2024 carry-trade scare this summer?

And to finalize this brief letter, here’s a chart I showed before. It shows that we may be entering the eye of the storm before the mid-term volatility starts in August:

The above seasonal graph is further underlined by the following data-mining statistic: The S&P 500 has made 20+ new highs in the first six months of the year. On previous, similar occasions, the SPX has never peaked before August, and the full year has been positive 100% of the time.”

And to take full advantage of that possible up month, we should probably go full beta momentum tech, where seasonality seems strongest, at least during the first half of the month:

What to watch today? Well, the possible release of the month-end edition of The Quotedian of course! Sign up below if you have not yet done so:

Sign me up to the only true free lunch !

Be safe,

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

"When the facts change, I change my mind. What do you do, sir?"

— John Maynard Keynes

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Yesterday, equity investors faced presumably a steep sell-off, as they faced a nearly one-and-a-half percent sell-off in the S&P 500 and a 2.2% drop in the Nasdaq.

But did they really?

As a matter of fact, more sectors in the S&P 500 were up (6) than down (5):

Similarly, more stocks were up (285) than down (217) and more stocks made a new 52-week high (20) than a new 52-week low (10) - see the latter statistic below:

Hence, let’s define yesterday’s market action less as a market sell-off than an AI margin call, which is also very well visualised in the S&P’s heatmap:

In any case, the initiator for the tech sell-off seems to have a couple of news items out of Korea, where for example the regulators issued a warning on leveraged ETFs. Nearly simultaneously, SK Hynix, a memory-chip maker said it was “shifting its focus to the general-purpose DRAM market”, which not only raised concerns about future profit margins for the company (DRAM is a low margin business), but also sent US memory-chip makers into a tailspin

—> Micron 13%, SanDisk 14%, Western Digital 8%, Seagate 5%, Roundhill Memory ETF 14%.

For the less high-frequency investors amongst us, our well-defined “lines in the sand” continue to rule our “action plan”:

The broader European equity market (SXXP) has been able to hold above support (previous resistance - dashed line), which can be considered a positive:

Nothing to report back from interest rate markets, but the coiling formation (dashed line) in the chart of the US 10-year treasury yield chart suggests that this may change in the coming days:

In FX markets we already have seen a break-out move, and whilst it is not the side we were “hoping” for, it is what it is … The EUR/USD broke below 1.1400 yesterday, absent a very quick recovery above again, the path is open to somewhere around the 1.10 handle:

Always remember Keynes (see above: QOTD)

Finally, the stronger US Dollar is also pushing Gold lower towards our initial price target around of $/oz 3,900:

Yesterday I posted the following chart on LinkedIn (click here),

with the promise to resolve it today. Well, here’s the updated version:

Now, what is important to remember is that this is about direction and not amplitude, but still … stay tuned!!

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“Well, we will be there, as I said earlier on, using full flexibility, but we are not here to close spreads. This is not the function or the mission of the ECB. There are other tools for that, and there are other actors to actually deal with those issues.”

— Christine Lagarde, ECB Governing Council press conference, 12 March 2020

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I have a very early (07:30) appointment this morning, so I will just super-briefly leave few bullet point comments on yesterday’s premier of Kevin Warsh as new Fed Boss:

• He’s a game changer

• He is hawk. The market new it but chose to talk it down - until yesterday

• Forward guidance is dead

• He wants to shake ‘things’ up, having announced five task forces to work on the following into year end:

  • (i) communication;

  • (ii) the balance sheet/operating system;

  • (iii) alternative data sources;

  • (iv) productivity, jobs and artificial intelligence;

  • (v) the inflation framework

Equities didn’t like it:

Bonds didn’t like it:

The Dollar loved it:

The one thing that has raised my eye-brow, though I could not confirm nor re-find the source, was a comment that Warsh did not care about short-term market movements due to his policy decisions, rather he is focused on long-term goals. This reminds me so much of ECB Boss Lagarde’s comments in 2020, her first meeting has head of that institution. The bond market quickly tested that resolve, which quickly dissolved.

Famous last words …

How many times did we hear that Kevin Warsh was the most hawkish of the possible candidates for the Fed chair, just then to be subsequently redressed as a dove once he was elected, mostly on the argument of “who would want to upset Uncle Donald anyway”.

Well, as the three day plot of the rate hike expectations into year end via Futures markets shows, adaption to reality was necessary, with expectation for hikes doubling:

Have a great Thursday!

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG