And now, looking at the chart of ^IRX, the 13-week Treasury bill, we can see that this looks very likely. Why? The yield is in the midst of a W3 move north.
|^IRX 13-week Treasury yield|
Next Wednesday's hike is in the bag, but the market's won't dive on the news -- this hike is expected. We will see a hard reaction from it, but it will take another week to arrive -- after June opex. For the next few days, it would actually be good for perma-bears to see a little weakness in the S&P 500, so we can achieve w1/w4 overlap on the chart at the 2398 level, for an ominous ending-diagonal.
The truth is, the markets realize that China is attempting new waves of magic credit creation, when they have clearly already pushed the limits of rank insolvency. It's time to give China the smackdown, and remind them who really runs Bartertown. The Fed won't sit idly by while China purchases what's left of the world's real assets with fake money, and sustained hikes in the USA will end this little charade right quick. Doom is coming to the Middle Kingdom.
Remember, historically, when things go crazy in China, they can get really fucking bad, something we in the West overlooked since our own nasty wars of the 20th Century.
If the 13-week yield keeps climbing in late August and into September, then the Fed will come under insane, intense pressure NOT to hike again at the September meeting. But if ^IRX is sitting at 125 bps, they will hike again -- a marvelous equity short. The larger 5 wave impulse can finish up after ^IRX finishes its larger impulse and brings the Fed to hike one last time in December.
However, the damage will be done at this point, as spec-u-vestors and riskloves scramble for safety in the 10Y Treasury. They will drive its yield well under 1.5% -- inverting the yield curve.
An inverted yield-curve here signals the hard recession -- deflationary depression, really -- in 2018. Stocks, real estate -- smoked. After stocks hit their low, on the lower bound of the "Jaws of Death" mega-pattern, the trendline off the 2003 and 2009 lows, then bonds peak and join them on the bonfire.
This concludes the 20th Century postwar period. The Fed has got 3 more hikes waiting in the wings for us -- this year.