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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Benkea who wrote (24431)	9/1/1999 6:39:00 PM
From: stockycd	Read Replies (1) \| Respond to of 99985

I'm so excited!!<ggg> C

To: Benkea who wrote (24431)	9/1/1999 7:28:00 PM
From: donald sew	Respond to of 99985

Benkea, I believe it was either in Mar or April when I felt that the RATEs would head to the 6.45-6.50% range. I still think it is possible although I have noticed the trend in the rates have slowed down a little. seeya

To: Benkea who wrote (24431)	9/1/1999 7:38:00 PM
From: nextrade!	Read Replies (1) \| Respond to of 99985

And not to overlook these, decisionpoint.com decisionpoint.com Regards, nextrade!

To: Benkea who wrote (24431)	9/1/1999 7:43:00 PM
From: Giordano Bruno	Read Replies (2) \| Respond to of 99985

Summer Breeze? By Dr. Sherry Cooper, Chief Economist, Nesbitt Burns Aug 30th Edition of Viewpoint ------------------------------------------------------------------------ New paradigm? Fed drains liquidity and financial markets rally. On June 30th—the first Fed rate hike—the long bond yield plunged 10 basis points and the S&P 500 soared 21 points. Then after the second tightening on August 24th, the 30-year Treasury yield fell 5 basis points and the S&P 500 eked out a 3 point gain. So on days when Fed officials brace investors for a rate hike (i.e. Humphrey Hawkins) the markets sell off, only to then rally when the deed is actually done. Conclusion: Sell the rumor, buy the fact. The Fed was at its masterful best last week. The 25 basis point hike in the funds rate was already priced in, but what wasn't were the words "markedly diminish" used in the post-tightening press release to describe the impact of the rate actions to-date on inflation risks. And, while the discount rate was also bumped up 25 basis points to 4.75%—maintaining the 50 basis point spread off the overnight rate—the Fed was quick to convey that it was not trigger-happy by simultaneously retaining the "neutral" bias. The main message is that not even the Fed knows what or when the next move will be, but that it does not want the bond market to automatically start pricing in multiple rate hikes as was the case during the 1994 bear market. Taking it one meeting at a time suits the Fed just fine, but this by no means suggests that the tightening cycle is over—a conclusion that the vast majority has jumped to over the past week. But sentiment can shift quickly, as we have already seen—surveys of money managers in mid-July showed that only 40% believed that the Fed would actually tighten last Tuesday. As well, Mr. Greenspan indicated at the Fed's symposium in Jackson Hole that asset values—where there is plenty of inflation—are playing an increasingly large role in monetary policymaking. That the Fed would issue a proclamation that inflation risks were substantially reduced by the two rate hikes this summer should really come as little surprise—the Fed's job is to ensure that inflation remains low and stable. In 1994, core CPI inflation receded to 2.7% from 3.1% and the Fed still tightened seven times by 300 basis points—the tightening helped sustain the low inflation environment. Similarly, if final CPI and PPI price figures were all that mattered, the Fed would have been fully justified to stay on the sidelines during both of the past two FOMC meetings. But the job of the central bank is to assess the balance of probabilities six to twelve months ahead and quash the pressures evident today that could sow the seeds of inflation. And, what was widely ignored by the markets was the opening statement in the press release that read "with financial markets functioning more normally, and with persistent strength in domestic demand, foreign economies firming and labor markets remaining very tight, the degree of monetary ease required to address the global financial market turmoil of last fall is no longer consistent with sustained, noninflationary, economic expansion." The strategy seems to be one of restoring short-term rates to their pre-crisis levels, since the crisis has long passed and the funds rate is still 25 basis points lower than it was just over a year ago—when the Fed was contemplating raising rates. Indeed, both the Taylor Rule and the historical tendency of the Fed to at least realign the overnight rate with nominal GDP growth suggest that at least one more rate hike is in the offing—the debate is over the timing. The Fed futures contract, which once had all but priced in a 25 basis point rate hike at the October 5th confab, is now discounting a one-in-three chance of another rate hike. The sharp compression in the 2-year note-Fed funds spread to a mere 30 basis points—a "normal" differential is between 40 and 50 basis points—suggests that the front end of the coupon curve expects no move at all. This is highly reminiscent of the short-lived jubilation immediately following the June 30th reversion to the "neutral" bias—the prevailing mantra was that the Fed was going to administer only one "flu shot". To be sure, the Fed will not have as much crucial data to chew on between now and the next FOMC meeting on October 5th—policymakers were at least armed with Q2 data on productivity, unit labor costs and the ECI heading into last week's gathering. But if the NAPM data on September 1st and nonfarm payrolls on September 3rd print on the strong side, expect a complete reassessment of the Fed policy outlook. Retail sales on September 14th and the price numbers—PPI on the 10th and CPI on the 15th—will round out the critical events calendar for the month (the Fed will have the September purchasing managers report but not the employment data in time for the October 5th meeting). Judging from the strength in the latest manufacturing surveys—the APICS index surged to its highest level since March 1994 and the Philly Fed survey was surprisingly strong in August—we would look for a bounce-back in Wednesday's NAPM figure. The further drop in initial jobless claims suggests strongly that this Friday's payroll figure will be strong and the unemployment rate may well have dipped a notch to 4.2% (consensus on the headline payroll number is +225,000 with a range of +190,000 to +310,000). The technicals and seasonals may well be bond-friendly at this juncture, but the reason why bear market rallies ultimately fail is because they aren't supported by the cyclical backdrop. That durable goods orders have soared at a 20% annual rate over the past three months, and existing home sales posted their third highest level on record in July, should be giving fixed-income investors cause for pause. For those clinging to those two words "markedly diminish" as an iron-clad guaranty that the tightening cycle is over, here is what we have to offer: When the Fed lifted both the funds and discount rates 50 basis points on August 16th, 1994, it issued a statement that read "these actions are expected to be sufficient, at least for a time, to meet the objective of sustained, noninflationary growth." This sparked a bout of euphoria quite similar to what we saw last week as talk of an end to the tightening cycle filled the air—the 10-year bond yield plunged 16 basis points that day. But by the time the next set of NAPM, payroll and auto sales data rolled out the following month, bond yields had bounced back 35 basis points and were headed higher still as the Fed tightened two more times by a combined 125 basis points. lp-llc.com