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One more day of S&P 500 gains extension almost to the neckline of Sunday's discussed inverted H&S. Rate cut odds went up with discretionaries rallying on better than expected UoM consumer confidence and inflation expectations. It‘s as if hotter core CPI and PPI didn‘t hit in days earlier, and understandably such increase in rate cut odds (fueling US equities and general risk taking) is helping the yen at expense of US dollar – for now, no fear of yen carry trade unwind wherever the exchange rate might be (yes, risk taking isn‘t dialed back last three days in a row).

Nasdaq performance relative to JPY is the greatest disconnect, and some of the banking sector performance is also leaving question marks – I address these in the the premium parts. Bonds though continue climbing, all of them that matter. Nasdaq though went from underperformance to outperformance ever since the post CPI flush, and consumer discretionaries are leading as well – 5,5% weekly appreciation compared to 1.1% for staples is remarkable, and nicely illustrated in SBUX, ONON, NCLH and similar – but then we have the WMT, COST vs. TGT disconnect with the XLF conundrum and semis underperforming Nasdaq.

XLRE and XLU are as fine as always, and XLI, DIA don‘t raise eyebrows either. Rotations secured a very decent Thursday, and cushioned S&P 500 also Friday. How much of the good news is being priced in? Bond yields have trouble retreating last couple of days…

Higher 50bp cut odds are no longer feared as not reassuring, not asleep at the wheel? The turn in sentiment says so, yet the question of what would power S&P 500 higher after Wednesday, remains. Springboard through shallow selling into FOMC followed by rate cut embrace is what the bulls would wish for.

With odds split 50-50 on 25 or 50bp cut, someone is bound to be positioned wrong. And market breadth for as good it is, it‘s just as extended at the same time. Hence, the fitting article title question going into FOMC…
 

What can I say about precious metals with oil? Clients haven‘t been surprised – the break higher got its follow through, and oil stabilized with visible trouble overcoming $70 as called.
 

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