Tradable Events this Week
Tradable Events this Week

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Bill Baruch joined CNBC's Trading Nation to talk about Apple

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In recent weeks, we described an economic inflection point. Our theme was to learn from the upcoming data with the Federal Reserves quarterly meeting in sight. Its now in the rear-view mirror and we learned a lot. The Fed and ECB both turned dovish and the data has been messy. Last week, the Fed projected no hikes in 2018 and announced they will end unwinding their balance sheet in September. Coupled with the ECB reintroducing TLTRO in September, it makes you wonder what these central banks see on the horizon. On Friday, German Manufacturing PMI came in at 44.7, the lowest since September 2012. The German 10-year Bund yield went negative for the first time since October 2016 (the ECB cut rates in March 2016). In the U.S, Manufacturing and Services PMI both missed expectations. This was the latest in a string of Manufacturing misses and the worst read since summer 2017 (Philly Fed Manufacturing did beat on Thursday). Amidst this weakness, the spread between 3-month and 10-year rates went negative on Friday for the first time since 2007. This is a recessionary signal and the spread between 2-year and 5-year rates went negative nearly four months ago. The CMEs FedWatch Tool now has only a 42.1% probability the Fed leaves rates unchanged this year. To clarify, there is now a 57.9% chance the Fed cuts rates in 2019!

In the week ahead, we look to more data and fresh Fed speak. German Business Climate is due Monday and Consumer Climate Tuesday. March U.S Consumer Confidence will be crucial on Tuesday and there is a slew of housing data through the week. Revised estimates on Q4 GDP are due Thursday. There are no less than six 2019 voting Fed members that speak with Chicago Fed President Evans and Boston Fed President Rosengren leading things off Monday.

The aforementioned recessionary signals typically do not force a stock market correction immediately but are instead considered a precursor to a day of reckoning. Equity markets did finish under pressure on Friday. While this was certainly in part due to the poor data globally, the imminent release of Special Counsel Muellers report also likely played a key factor. Still, the S&P is up more than 20% this year. What we can gauge now that the Fed has shown their cards, bad economic data seems to be bad again and good data, such as Philly Fed Manufacturing on Thursday, should be good for stocks. As for Muellers report, there are no new indictments and there could be more details today (Sunday). U.S and China trade is back in the headlines with U.S Trade Representative Lighthizer and U.S Treasury Secretary Mnuchin traveling to Beijing this week for a new round of high-level talks set to begin Thursday. These talks typically produce positive headlines that lift stocks, but we have yet to see any real substance.

Lastly, a dovish Fed, poor data and a weak equity market on Friday all played a role securing a breakout in our favorite chart, the 10-year Treasury Note (below).In last weeks Tradable Events,we pointed out that one of the Treasury markets most bullish attributes is how heavily positioned the Leveraged shorts are and not only in the 10-year but across all durations. As of last Tuesday, the near record Leveraged short position stood at 1,292,981 and longs at 337,579. Such a heavy short position upon this upside breakout is bound to spark a short-covering rally this week. The only headwind is this weeks auctions. However, for months, we have said lower price action due to fresh supply is a buying opportunity.

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The Midday Market Minute is recorded and posted daily, check out Friday's.

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Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results