Hey There Income Hunter,

I have been saying that I think recession has become more important than inflation, and I think yesterday’s market reaction proves that.

Now, the Fed has its final inflation report before its July 27 meeting and it certainly was a doozy (a 40-year high of 9.1%)…

My question is what are they going to do when the upcoming earnings season really gets going?

Today we will get earnings from JPMorgan Chase & Co. (Ticker: JPM) and Citibank Inc. (Ticker: C) and I do not think they will be very good.

The global economy is sinking fast and the strong dollar is not showing any signs of weakening, which puts more pressure on our trading partners. 

I am holding to my opinion that the Fed will pivot away from tightening before the end of this quarter – and I went live to explain that (and how to profit from it) last night.

Today, I’ll run through a couple of eye opening moves in the market    

Yield Curve Flattening

The US Treasury bond yield curve made a major move towards further inversion yesterday. This is a sign that economic growth is accelerating to the downside.

This is a pretty strong signal that interest rates will not be going much higher beyond the next Fed meeting …

Here is a snapshot of 2-year/10-year with a further inversion of .10% yesterday.

The above move is more indicative of a deflationary environment. This is a big sign that the bond market believes the Fed will be able to slow inflation.

Meanwhile, the precious metals market was the best performing sector yesterday, which contradicts the yield curve. 

Precious metals in my opinion are signaling a loss of confidence in the Fed and smart money is starting to move out of financial assets into real assets to protect wealth.  

Notice the ETFMG Junior Silver Miners ETF (Ticker: SILJ) chart below. Yesterday’s candle is a bullish engulfing pattern that may signal a reversal in the correction SILJ has been stuck in.

The next week will reveal a lot about market positioning …

Bring It Home

The issues that I think are most important right now are Europe’s decision on what to do about its lack of energy and Japan’s decision on what to do about its bond market.

Janet Yellen is going to Japan to discuss the options for stabilizing foreign exchange rates and that is telling. Will that be a driver for the Fed to pivot back to QE so they can sell dollars and buy Japanese bonds?

The central bank has the ability to do that in its charter and the stronger dollar is a concern around the world, so stay tuned.

Live and Trade With Passion My Friend,

Griff