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Things to know

  • Jay Powell – That’s all     you need to know today. 

 So stocks did just as expected – nothing really – other than waffle around, waiting, treading water, biding its time – attempting to move ahead while being pulled back as investors/traders and algo’s try to figure it out.  Figure out trade, figure out Fed Chair Powell’s testimony, figure out what’s next for the ECB (European Central Bank) and figure out what’s next for the global economy.  Tech stocks rallied a bit – taking the Nasdaq up 43 pts while some of the big industrial names got whacked over speculation about the impact of the trade war on earnings – causing the Dow to lose 22 pts and keeping the S&P tight at +4 pts.  Now look – the Dow, S&P and Nasdaq are all still near the record highs in the face of all this concern….so what does that tell you?  I mean – it’s not like there is a secret…..but what it tells me is that the mkt is ‘expecting’ a rate cut – clear and simple….and that everyone is going to pay special attention to what Jay Powell says and HOW he says it. 

And while the FED has said that they would do what they need to do to keep this rally going – at some point – when is enough enough?  Like I pointed out yesterday – rates at 2.5% are fairly accommodative (no?)……and the 100% bet that we would get a 50 bps cut one month ago – has dropped dramatically to just 4%….but the bet that we get a 25 bps cut remains at 100%….  .so what does that mean?  All it means is that investors and traders are betting that he cuts – it does NOT mean that he is cutting – or does it?  I mean if he doesn’t cut – then the mkt will go into a free fall – as the algo’s will go wild  – and HE will get blamed for not doing what the mkt expected, Donny will bash him on Twitter, Congress will question his motives and the administration will try to settle it all down  – Stevey Mnuchin will tell us that a trade deal is all but done and Larry Kudlow will spin it to stop the bleed.   I mean yesterday on CNBC’s The Exchange –  he told us that Powell’s job is safe – (for now).   But look – he is in a tough spot – unless he completely caves in and gives them everything they want – A rate cut, A continued dovish tone and A promise of more cuts to come the algo’s won’t be satisfied…..but should we let algo logic drive monetary policy?  Of course not – I’m just sayin……

 If he disappoints (and that is debatable) Buyside interest will dry up – leaving a void in prices forcing the sell side algo’s to scramble for the door – the move would be swift (we’ve all seen how that happens)….But – just because the mkt  bets are all lined up on one side does not MEAN that the FED has conceded – it is not their job to concede – it is their job to do the right thing….and if the right thing is to be a bit more patient – then so be it….let the algo’s do as they will – because in the end – we created this, we gave up the power and control… no need to complain – it is what it is.  (I’d back up the truck…..)

 Now if he indicates that the rate cut is coming at month end – then watch the mkts celebrate a bit – surge towards S&P 3000 and then stall – (again) as investors and traders await the beginning of earnings season – Because the angst will shift from rates – to earnings season and guidance – and if yesterday’s new out of Europe and BASF is any indication – then expect to hear more negative news about the strength (or weakness) of the global economy and the damage that the trade war is inflicting…..Either way – it is sure to be an interesting day…..if not an entertaining day – since so many of our elected officials have little to no clue (which only adds to the confusion)  – and that is evidenced by the questions that they ask….just watch……

 Powell will describe the current state of the union, he is expected to lay out the case for a possible rate cut , but he is not expected to commit to any specific schedule (again the July expectation is just that – the MKTS expectation), he is now expected to be a bit more hawkish (meaning that he may choose to wait) and if asked will defend the very independence of the FED – even in the face of continued WH criticism.  Remember – the economic news is NOT as bad as some will have you expect – but if they are trying to force a cut – then of course the data is weak… it is up to Jay to set the record straight – and if that is short term painful  then so be it…..My money is hoping that the FED does what’s right – PERIOD.

 Overnight – global mkts trended a bit lower and US futs are off small as the clock ticks……The Dow is suggesting a loss of 65 pts, the S&P is pointing lower by 9 pts, the Nasdaq is off by 26 pts and the Russell is down 5 pts.  There are no eco data points so expect the focus to be on the FED’s testimony.  The written will be sent to the ‘masses’ at 8:30 am – giving investors/traders and algo’s an opportunity to see what is coming down the pike – but remember – the written word and the spoken word can be interpreted very differently – and the algo’s can NOT interpret tone or the meaning of a word in a sentence…..all they can do is interpret the meaning of the stand-alone word – and that is where it gets dicey… watch what the mkts do at 8:30 to understand what the algo’s assume….as they always ‘shoot first and ask questions later’…….

 The only other thing that will add some volatility is that St Louis FED Pres Jimmy Bullard is set to speak at 1:00 pm – clearly to help interpret Powell’s commentary – but remember – Jimmy is a non-voting member – so his comments are just his comments and then at 2 pm – we will get hit with last month’s FOMC mins……  Also at 1 pm is a 10 yr bond auction – so watch both final demand and yields as this will also help to drive the action in the middle of all this noise.

 If we get what is expected – then like I said – expect the mkt to challenge 3000 and stall…and if we get any disappointment –  watch as the mkt comes under pressure……(the first trendline support is at 2887 or 3% lower from here) – Not that I expect that to happen at all – I’m just pointing it out

 Take good care


 Prosciutto & Cannelloni Bean Bruschetta

 Bruschetta – is an Italian antipasto really – usually toasted garlic breads topped with tomato, red onion, garlic & basil.  But it can be anything you want it to be…and lends itself to an unlimited number of toppings – so today – try this.

 For this you need:  Cannelloni Beans – ( 1 can good quality Cannelloni Beans), Drained, 6 Slices Prosciutto, Chopped,  chopped onion,  garlic cloves – sliced thin,  s&p, olive oil, chopped parsley and  Italian bread and black olive tapenade.

 In frying pan, cook the prosciutto until it has browned.  remove and set aside.

 In the same pan – Add olive oil, and onion and cook the onions they are caramelized. Add the garlic and cook for another min or so.  Add back the prosciutto.

Now add the beans,  season with s&p and a splash of olive oil and mix.

 Cook for a couple of more mins and then using the back of a fork, lightly mash the beans.

 Remove from the heat and add the chopped parsley.

(If the mixture seems dry, add a little more olive oil).

 Grill or broil the bread slices until they are golden brown on both sides.  (you can brush with melted butter and minced garlic if you like – garlic is good for the soul)

 Once toasted – spread with the bean mixture.

Top with a dollop of the olive tapenade and a drizzle more olive oil and serve.

 Buon Appetito.