Week Ahead: Goldilocks Reversal

The chop

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Key Tension Into FOMC:

There is an important reason I took off all the Goldilocks trades in the short term (link). We have two and a half weeks until FOMC and both stocks and bonds have limited upside into FOMC. I even did a video breaking down the charts and levels for assets (link).

Here is the deal, goldilocks remains the dominant regime but we are likely to see some degrossing in positioning as we move into FOMC. This is one of those key times when you need to operate on multiple timeframes.

Everything is about the PATH of rate cuts right now and how aggressively they are getting priced in (link). I noted in the macro report that the key to managing oscillations in macro flows will be the SPEED of rate cuts in the forward curve.

We continue to see this. Here is the probability of a cut in the March Fed Funds futures contract overlayed with ES (inverted):

With this tension in mind, we are likely to see both bonds and equities have a neutral R:R during the time until FOMC.  

The catalysts to watch for confirmation of the neutral R:R are the earnings releases we have this week in the S&P500 index.  Watch GS 0.00%↑ and MS 0.00%↑ !

For the bond side of things, economic data prints:  

And fed speeches:  

Trades: