Now you know what the Investor Alert is all about. We expose tripwires. And believe me, Wall Street is covered with tripwires. For example, a few days ago Wall Street demolition teams have been stretching wire near ground level to get you to believe the Fed was going to halt its rate increases sooner, rather than later.
We have been telling you that the Fed will raise rates at least 1 or 2 more times before even considering a pause. Now, that being said, the Fed has to be very careful not to raise rates beyond current market rates. So what does that mean? The Fed Funds rate is at 3% and the three-month Treasury bill is currently around 2.8%. The Fed rarely exceeds market rates, so we know that a pause is coming unless the yield on the 3 month T-bill begins to rise.
Another reason the Fed has to pause is the yield curve. The Fed does not want an inverted yield curve. So, unless the yield 10 year treasury begins to rise, the most the Fed can raise rates is 1-2 more times. Of course, if longer term rates begin to rise, all bets are off.
A few other tripwires are of course, oil prices and technology stocks. The most recent pullback in energy gave you a decent opportunity to increase your exposure. Short covering in technology is giving you an opportunity to lighten your positions. Short interest remains fairly high, particularly in the NASDAQ.
