Friday belonged to Warsh. The Fed chair used his Jackson Hole speech to praise the labor market and to make clear that better inflation prints have not convinced him the underlying trend has improved, and the market took the hint. Pricing moved to 37 basis points of hikes for the rest of the year, up from 27 before the speech, with the odds of a September 16 move now near 57%. Yields rose across the curve, the Fed-sensitive 2-year spiking 12 basis points while 10- and 30-year yields added 5 and 2. Equities slipped in response, the S&P 500 off 0.25%, the Nasdaq down 0.52%, the Russell 2000 hit hardest at minus 1.39%, the Dow flat. The dollar index gained half a percent. The sharpest moves sat in the metals, where gold fell 3% and silver 4%, while wheat jumped another 3% to cap a 12% week as the Russia-Ukraine war escalated, and Brent eased 0.4% to around $89.30.
The scan answers with its deepest possible reading on exactly the market Warsh moved. The day’s thesis is that the long end of the bond market has run into a maximum-strength topping warning, a reading that the rise in yields could stall or reverse, while the Fed chair argues for higher rates, and one of the two sides has to give. The 20-year Treasury yield reaches the bearish maximum of -100 with a bull exit, the buyers step back and the climb no longer carries, and the 30-year escalates to -87 with a bull exit of its own. Both readings stand on data through Thursday’s close, so Friday’s yield rise ran into a freshly hardened alert, the same confrontation the rates call has carried since it escalated in the August 22 review and moved to the center of the scan on August 26. The second thread sits in the metals, where the model had already stepped down from most of the hard-asset wall it flagged on August 5 and confirmed on August 9. Silver and the miners dropped off the model’s alert list over the past two weeks, so Friday’s 3 to 4% metal slide landed on positions the model had normalized, and what remains under test is gold’s six-cycle floor.
Our daily analysis filters roughly 45 markets through a cycle consensus engine. Each asset receives a Consensus Score from -100 to +100, the model’s summary reading for a possible turn, where positive values mark potential cyclical bottoms (a time window where a decline could end) and negative values potential cyclical tops. Readings beyond ±60 enter the critical zone, a critical reading at which the cycle model raises the alarm for a possible turn. Let’s take a closer look.
