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There is a very interesting Pre-Game developing here in both the US Treasury and Currency markets ahead of Ben Bernanke’s Game Time (2:15PM EST).

In the chart below, Andrew Barber and I show the immediate term TRADE line breakout we are seeing in 2-year Treasury rates. That breakout line is at 0.99%, and the marked-to-market rate is currently 1.02%, testing 4-week highs…

Coincidently, the US Dollar has stopped going down. Anything that isn’t down versus the Burning Buck’s YTD low (yesterday) is, on the margin, US Dollar bullish.

Understanding that bottoms are processes (not points) is critical, but so is respecting that Bernanke has the world power to crush short term Treasury Bonds (letting yields rise) by simply changing his rhetoric on the Fed Funds rate. ZERO percent isn’t a perpetual position.

Again, he doesn’t have to signal a rate hike absolutely. All he has to is signal one rhetorically, and that bearish intermediate term TREND line for 2-year yields at 1.07% (red line in the chart below) will be in play.

Dollar up, rates up = a lot of things REFLATION down.

2-year yields are where they are Pre-Game. Oil is getting hammered. Copper has broken its immediate term TRADE line ($2.85/lb) as well.

Stay tuned…

Keith R. McCullough
Chief Executive Officer

Pre-Game Fed Watching...  - a1