Raoul Pal @RaoulGMI Founder/CEO - Global Macro Investor and Real Vision Group, Business Cycle Economist, Investment Strategist, Economic Historian, Traveller and Rum Drinker.. Oct. 28, 2019 1 min read

I think the battle lines are being drawn between the Jay Powell "mid-cycle adjustment" believers and the rates are going to zero fans. The next 4 weeks are probably crucial. If the economic evidence is that the CEO Survey is right, then the Fed are behind the curve...

And the equity market will likely fail at the highs again.

The model of the 2yr rate of change of Libor is also remarkably similar to the CEO survey...

But maybe the SPX is leading and the business cycle is in for a renewed up phase (either a full one or a mini-cycle), then Eurodollar interest rates futures might be forming a head and shoulders top... this is the risk to my view.

But my favoured outcome is yet another wedge pattern and a pullback similar in size to the early ED set backs in 2007 and 2001 of around 60 ticks to 75 ticks.

Another way of seeing the conundrum is 10 year bond yields. We are either seeing a change of trend or its 2 standard deviations from trend and will roll over again soon...

It's kind of the same with the equity market. This is either a very bullish break out...

Or its a death trap...

But only time will tell. I err on the side of this being yet another opportunity to buy bonds but Im extremely cognisant of the risk, so have reduced exposure until clarity comes. Either way, whatever happens now will likely set the tone for the next 3 months.

Good luck!


You can follow @RaoulGMI.



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