$SPX Sending Powell the Wrong Impression

In an attempt to recover their huge losses throughout Q4-18, Wall St. is piling back into the things that got them obliterated like cyclical sectors and the SPX more broadly.

As traders chew on Powell's bone (no puns please), yields are not signaling a Fed pause in policy. I contribute some of the pull back on yields (and correction in gold) due to the huge net-shorts in speculative contracts. The U.S. 2Y was the most net-short position prior to the collapse with over 400,000 net-short.

Following the huge non-farm payrolls (312k v 172k exp.), equities and yields pushed higher. Well, that's not the kind of moves ahead of an imminent Fed pause.

In fact, the rebound in yields and equities and the stagnation of the dollar give Powell room to continue tightening. Again, language is a subjective trigger. Powell will manage your expectations with his sweet nothings as the 10s/2s curve continue to compress.