December 4th Market Update – Trade tensions strengthen the USD, Fed policy changes weaken it; Observations over the past couple days

I have uploaded a market update for December 4, 2018. Click here to go to the show archives page to listen or you can listen on the link below. You can also right mouse click here to download the podcast.

-Recall our conversations about the historically stretched short trades in the Gold and 10-year UST futures contracts. Most did not make money. By default, it pays to take the contra side when sentiment is that lopsided. Sometimes it takes time to be proven right.
-Much of the recent changes in the UST yield curve stem from the ostensible shift in US Fed policy, not any tariff talk. The Fed’s intimation of a more dovish approach has been the catalyst for yields on the longer end to fall. Much of the proposed Fed fund rate increases are already reflected in the short-end. I would not get too caught up in yield inversions and what they mean. When everyone else is studying them they lose their significance.
-The drop in yields should help relieve the emerging market pressures. Never underestimate the elites’ ability of keeping things going.
-Commodities got a lift since Wednesday when Powell spoke. Will it fade?
-The USD has been supported in the wake of the trade talks as much of the excitement has waned. Trump is beginning his tweet storms again, undermining the hope of a trade breakthrough.
-Stocks give back most of the trade talk pop. Weak shorts buy back into the excitement.
-I continue to stay in cash. The whipsaw is not worth it.
-Bitcoin investors are beginning to realize they made a mistake. I have been combing the crypto shill websites and social media and their tune is changing slightly. I am spotting contrition and regret. These observations are necessary to help locate a market bottom (we are not there yet).