Watch for the Revolt

Bulls initially celebrated The Fed choosing to stand pat today, even though the odds in the interest rate swaps market clearly favored no hike (nor cut). There were three dissenters favoring a hike. But without question the initial move off the Fed decision in stocks was higher, with the Nasdaq climbing back soundly in the green during Fed Chair Kevin Warsh's presser. 

As we are moving through the final hour, though, sellers are reasserting themselves as I write this, with the semis and now Nasdaq back soundly in the red. 

And while we have seen this movie many times over the years with Jay Powell, where some initial FOMC Day volatility eventually gives way to a rally higher, one important distinction I am seeing is the long end of the Treasury curve. 

On the TLT daily chart, below, note the heavy and steady selling today. We noted with Members previously the multi-day bounce into today's FOMC as the continued confidence (or complacency) from bond bulls that everything would work out in the end and rates would head lower. 

But that is clearly not the case today, as the recent bounce may be merely a bear flag in the context of a downtrend on multiple timeframes at risk of breaking much lower. And that means the risk of rates on the 10-Year out to the 30-Year is much higher. 

It has been several generations since we have seen true bond vigilantes on Wall Street, to the point where many dispute they exist at all or ever did, akin to a mythical Loch Ness Monster. 

However, entrenched inflation with a Fed way behind the curve (they should be hiking) is still a classic formula for a bond market revolt, with rates on the long end skyrocketing higher and eventually forcing the suave Warsh to sweat through the grains on his suit. 

Simply put, if TLT decisively breaks the May lows right here, right now, and continues a fresh breakdown it will supersede just about every other issue in markets and the economy right now. And for those who know their history, that is not an exaggeration.