I know it's a late-summer Monday, but futures are looking a little like they're hunkering down for a storm. I don't like to see the market test a major Fib retracement and the 50-day moving average and then essentially do nothing.
Friday's action conformed to expectations and left what appears to be a falling wedge pattern by the close. 1663.60 needs to be exceeded to break the pattern. Otherwise, the actual 38% Fib level is 1652.62, and the volume shelf remains at 1650. Below is the 61.8% Fib level at 1617.38.
The July Fed minutes come out Wednesday at 2pm ET. The Fed's swell Jackson Hole get together starts Thursday. I'm betting there will be ample communications tooling to goose the market up and down this week, enough to probably end it unchanged.
Visited a J.Crew store this weekend and was amazed. CEO Mickey Drexler made GAP a sensation back in the 90s, and is known as a big picture guy that reads trends well. This fall they're serving up checkered flannel shirts and corduroys in a stylish 70s handyman sort of way. We're only 3% off all-time highs in the market and yet Drexler & Crew seemed to be looking back to the era of the Dow Jones doldrums for inspiration.
Then there was a record-setting Ferrari auction at Pebble Beach. A Ferrari Spyder sold for $27.5 million. Putting the two of these together appears as if mixed social mood is alive and well.
The mood seems to be affecting the U.S. repo market negatively.
Bloomberg notes that the U.S. repurchase, or repo, market where banks and investors borrow and lend Treasuries and other fixed-income securities shrunk to $4.6 trillion daily outstanding last month, down 35 percent from a peak of $7.02 trillion in the first quarter of 2008.
Fewer repos and lower inventories of bonds mean less liquidity in times of market stress, wider gaps between bid and offer prices, and longer time to complete trades. The potential consequences are higher borrowing costs for governments, companies, and consumers.
Keep watching the 10-year yield.
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