The markets took Chairman Powell's Wednesday comments in stride. Things began to change on Thursday beginning with a disappointing jobless claims report. This report was interpreted that maybe the Fed may have a problem getting people back to work and keeping inflation under control. The 2-year Treasury yield spiked while the 10 and 30 year yields fell. But on Friday St. Louis Fed Chair Bullard spoke, suggesting that the Fed had started discussing tapering. We ended the week with a sell off on a summer Friday afternoon.
Despite selloff last week and rebound today, S&P Large, Mid Cap, Small Cap and Europe indices remain strategically Bullish; China and Emerging Markets remain weak.
Equity Styles: Value further weakened vs. Growth, Large Cap Growth held ground. Small and Mid-Cap indices weakened more than large cap.
Ranked Sectors: Energy, Real Estate, Communication Services, Financial; Laggards - Consumer Discretionary, Materials, Utilities, Staples.
The 30-year US Treasury Bond, 10-year Note Yield trend weakened. The short-term rates fell too much, too fast, and reversed up today. The 2-year note jumped to 0.270 from 0.164. The Yield Curve long term trend is positive but flattening, with the spread declining to 1.23. The Short-term shows narrowing too much, too fast.
The Australian Dollar, the Euro, and the British Pound, spiked down to short term oversold and bounced up today. Gold fell dramatically, short term oversold, bounced up.
As noted last week, the US Dollar, while strategically Bearish, made a triple bottom (!) and has strengthened dramatically; short term overbought, retreated. A stronger US Dollar is negative for Emerging Markets, and commodities. US interest rates may rise.