Bonds are trading near their highs for the year and yields are at their lows. The markets are largely expecting the Fed to leave rates alone next week.
The market is currently pricing in almost a zero percent chance of a rate hike. In fact, the CME Group’s FedWatch tool has the probability of an interest rate hike at only 2 percent for next week and only a 25 percent probability for a hike in July.
I want to reiterate that in my view, based on all the charts and my AI models: The Fed will make its move later this month and raise rates.
Again, from a fundamental point of view, it makes sense. The Fed is getting all the positive data-dependent info it needs to raise rates, the sole exception being May’s lousy unemployment figures.
In addition, the Fed does not want to be seen as political, so the longer it waits to raise rates, the tighter the bind it gets into. So any unexpected move or comments by the Fed next week will send the markets into chaos, which in turn would send bond yields higher and bond prices much, much lower.
Therefore, I am recommending a short position today in the bond market. Details in a minute.
Now on to gold. Gold is still trading largely sideways between two mid-term levels: $1,287 resistance and $1,206 as support. Unfortunately, gold’s bounce toward the top end of this range has sent mining shares higher and you were stopped out of your DUST position and your JUNE DUST call options are also down. You are running out of time for these to work out, but any surprise from the FED next week could send mining shares into a free fall.
You have also been stopped out of your SPXS position this week. Stand aside for now, I may recommend another bearish gold position again shortly, but wait for my signal.
Natural Gas. Natural gas prices have finally broken out of their downtrend, but the prices are now nearing some key resistance levels.
The upside breakout move in UNG simply took longer to play out than anticipated. And since these options expire next month, time-decay in the options will accelerate sharply in the weeks ahead … meaning they’ll lose value even faster as expiration nears, so I think it’s time to exit our UNG position.
Here are the details for the bond trade I recommend today and for exiting the UNG position …
For ALL Members:
Alternatively, if you bought shares of UNG, SELL all your shares in UNG at 7.80 or better, good till canceled. When filled, cancel your protective sell stop. |
Be patient. Hold all positions and related stops, it’s starting to get interesting.
Best,
Larry
