Yields

Below find a  daily graph of US 5 year yields that have scored a multi-year high today.5 year yields following the short end of the curve  higher  in making new multi year highs.The cause is pricing in more not less fed hikes.5 year yield

Below look at 10 year yields on a daily basis,as they have struggled to breakout of a 2 month sideways pattern.Short end worried about rate hikes  long end  worried about Inflation.If 10’s can trade above 2.48 Yield it will be approaching  a 2 year high.lets see  a break of these yield levels and then we could get some technical momentum helping to push prices even lower/yields higher.Dow +375 is sure a good way to test these yield levels.

10 yr yield

2 years yields ,8 year high,5 year yields 6 year highs and  10s cant even make YTD highs.You have to believe that the wave of Higher short term yields will eventually turn into higher  long term yields.But we need the catalyst of  higher Inflation to make that happen.

banks

take a look at these 2  30 minute charts of  the XLF  and the BKX ,Financials and banks.Look at the date on the inflection point it was the day that OMB Director Mulvaney took over  as head of the Consumer protection agency. Incoming Fed chairman Powell also sounded less aggressive when it came to bank regulation when he testified at congressional hearing earlier this week.less regulation=Higher bank stocks ,tax bill pass= Risk on . A double dose of good news for the sector that has also been provided a boost from the rotation out of Big tech into banks.

BKX  30 minute

bkx

XLF  30 minute

data line xlf

DOW +315

Dollar

Dollar on the offer as Senator Collins raising concerns about senate tax bill,Senator Corker saying he hopes to vote on tax bill tonight and a story that Tillerson is being forced out by trump.Just out on Wires is Comment from Senator McCain who said he will vote for this Tax bill this is  now providing a small lift to the dollar as it is off session lows.It really is providing a boost to Stocks as Spoos + 19 handles now,Nasdaq down 150 handles yesterdays at one point now higher by 55 handles. Crazy indeed.

OPEC meeting now over and a big dud.One bullish nugget is that OPEC delegates said no exit from production deal were discussed at meeting and Libya and Nigeria would agree to a cap on output.Oil  just chopping around and is little changed from earlier levels.

Risk On Theme after mCcain Vote .

Morning 11-30

NASDAQ +15 handles this morning after dropping 1.7% yesterday “fang” Stocks dropped between 2-4% weighing heavily on Index. However, fear not NDX still up ~27% for the year. Some of this Tech weakness was felt in South Korea and Taiwan where stock market closed down 1.5% or so. NKY though +.5%.Chatter was that A rotation out of Tech into Blue chips or anything not tech as SPX and Dow closed little changed. Most European stock markets higher and why as the Worlds broadest equity market the MSCI all country index will close higher for 13 the consecutive month (Reuters) The other big Story, Bitcoin has calmed down somewhat today as It trades 9958, trading 3% lower than yesterdays “settle”. Yesterday’s panic selloff was exacerbated when one of the exchanges went down. Still working out the Bugs I guess. Overnight Economic releases saw EZ Unemployment and CPI, The former lower then consensus by.1 and the latter higher then consensus by .1%.The more important CPI print weighed on the Euro for a few minutes but she sits unchanged on day trading higher than she was prerelease. Euro Unchanged, Yen down 30 ticks and Dollar up a couple ticks. GBP higher as it continues to expect a smooth Brexit divorce now that a cost is agreed upon GBP+50 Pips.
OPEC meeting concludes today and it appears that Production cuts will extend until end of Next year with members possibly meeting next June to discuss progress of cuts. No surprise if to markets if true. OPEC press conference scheduled for 8:00 today. Currently oil +1%.Natural gas giving back some of her recent gains as prices have rallied some 9% so far this week. Mid December, Artic Blast not going to be as cold as forecast.
Copper +.5%, Gold and Silver little changed. Dollar activity will be driver of action today. Month end today may see more than normal action as some funds may call today their yearend.
The senate may bring to the floor there version of Tax bill as it has cleared all the appropriate committees. Today’s vote does not make this bill a law as it must be reconciled with House before sent to President. The surprise would be no Vote on bill this week. Next week the political conversation will turn towards Government shutdown, Budget ETC. never ending political drama.
Notes:
• President trump Nominated Marvin Goodfirend to be a Fed Governor a position that has been vacated since 2014.He is perceived to be a hawk
• Monthly PCE Inflation reading is economic highlight of day.

Rotation

NDX -1%  SPX=Unchanged,Russell +.5% and Dow +.3% Hmm.  Plenty of talk and rightfully so I guess, that A rotation out of Big Tech into Blue chip stocks is underway.Approaching the 10:30 European Cash Equity close and Dax went from +.8% earlier this morning  to unchanged ,Stoxx also +.6%  now unchanged on day as cash closes.The weight of NDX losses  too  much  for Other  Stock Indices to ignore  for now  but they haven’t collapsed. I cant recall last time saw such a diversion between 2 markets

Long End Bonds

I have mentioned many times  over last few Weeks the persistent Flattening of US yield curve.A day of reckoning was coming  for that trade and that day may have come.One step closer with tax bill becoming law,Upbeat comments from Fed officials regarding Inflation and growth are also changing sentiment..A one way trade just needs a sliver of worry to turn around and we are seeing that today.

Look how  yield curve is steepening today  as Long end sold aggressively when compared to short end.The time to exit the flattening trade may be forced upon late to party traders today. 2-10 1 minute chart

2100

2/30  1 minute chart

302.PNG

5-30 steeper

305Most likely volatility will continue if the forced unwind of this trade continues

 

Morning 11-30

Bitcoin, Bitcoin almost $11,000 just crazy Broke 10K last night and almost Breeched 11k earlier this morning.
Germany Inflation higher by .1% but had little lasting impact on Euro. One-step closer for republican tax Plan to become law has been driver of sentiment and prices overnight. European Bourses also getting a lift from Comments from EU leaders saying they have reached an outline agreement with UK for Divorce bill, GBP +60 pips .Fiscal Policy the driver of action again.
Chair Yellen makes one last congressional testimony today as Fed chair, her comments hitting wire at 7:00 and having an Impact on the markets. She said
• “US expansion Increasingly broad based”
• Low inflation likely transitory” She differs here from what Powell hinted at yesterday
• “Growth appears to be up from Subdues pace”
Spoos +3 handles, NASDAQ +2 DAX +.8%, Mib +.8%. Treasuries lower more so on long end as curve steepens as tax bill and Yellen comments create a feeling of Higher not lower inflation in the future.remeber how aggressively yield curve has been flattening so some adjustment, Stops Loss profit taking should add to curve steepened
Dollar higher, gold lower. First revision of GDP is of Minor importance today, as markets are forward looking not backward.

What an Afternoon

North Korean ICBM missile launch ,  Still no comments from Trump.Senate budget committee agreed to vote yes on tax plan As the 2 no votes Johnson and Corker got what they wanted from Trump and in turn will  bring bill to floor for a vote on Thursday.SPX +23 handles Dow +200.Watch  Russell as a proxy for Tax bill vote.

10’s  traded heavy after weak 7 year Auction,caught bid on Korea and then faded  into close on Tax announcement.Vix +3 %,10 year vix +1% as well