Just one day after stocks hit a five-year high and traders are already positioning themselves for the next leg of the journey, a trek that many expect will take the form of a downhill slide following the steady upward slope of the past 3 months.
Labor Day weekend may still be a full ten days away, but a changing consensus on the timing and type of more Fed stimulus has not only sparked a new flight to safety trade, but it's off to an early start.
In short, stocks are weak, oil is easing and treasury yields are coming down.
"The data has not been horrible but it hasn't been that great either," says Kevin Craney, Sr. Commodities Broker at RJO Futures. "It really doesn't warrant that much action from the Fed at this point."
Driving Craney's call, is not just his belief that stocks have had a great run, but that the rise in Treasury yields, a fact that he says is reflected in a three-day trend reversal in U.S. government debt.
"The market is doing the job of the Fed," Craney predicts, as he simultaneously wonders what the next catalyst to move stocks higher will be. "We are starting to find a bottom in rates," he says, speaking of bond prices, not yields.
So if the Fed does indeed stay put for another 2, 3, 4 or more months, that would open a window to haul the 10-year yield right back down to where it came from.
"We could see the 1o-year go back to 1.50% range, and I wouldn't be surprised to see it go a little lower too," he says. "I think rates are starting to reflect that nothing is going to happen for the remainder of the year."