Let That Sink In
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S&P 500 followed my path into the FOMC announcement (spike) and conference (ultimately selloff), no matter how opaque the statements had been up till it became clear that June is actually, really a live month for rate hikes too. The odds assigned are enough to cause turmoil, and crucially invalidate the notion of a dovish hike, pause, pivot, upcoming rate cuts as early as Sep and similar.
I hope you took advantage of extensive live coverage on Twitter – let me pick only two highlights, first for betting on the hawkish message ultimately coming through, and then the key confirmation from most risk-on metrics that got too extended when Powell was talking from both sides of his mouth. Heavy selling stuck into the early aftermarket – and the Fed defying trades were in vogue European morning – this is what the bears are after.
4,128 is the key „point of control“ for today (and AAPL isn‘t likely to pull the rug from under the buyers when its earnings are announced after the close today) – and 4,095 is the bearish objective for either today or the nearest future.
Banking headlines have sure helped this morning as well (no, insuring all deposits wouldn‘t solve small banks – and I commented on the T-Bills idea efficiency yesterday alrealy), and the unemployment claims paint a job market picture of relative strength still (layoffs well below figures characteristic of earlier recessions / run ups to recession). ECB in the meantime went with 25bp only, and takes the heat off USD for a while (i.e. letting it to crawl back towards 102 at least, all without any debt ceiling drama).
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Let‘s move right into the charts (all courtesy of www.stockcharts.com).
S&P 500 and Nasdaq Outlook
Very good progress the bears made, and I‘m looking for cyclicals to be leading to the downside. More banking headlines are to come, and more tightening and balance sheet shrinking effects have to cascade through the system.
The inevitable break of 4,095 (to be followed by 4,078) would of course require improvements in the below shown market breadth snippet – no panic in the markets just yet, there are still doubters of the Fed keeping its restrictive stance no matter what the short end of the curve vs. Fed funds rate comparison (stop now!) says.
Powell ain‘t stopping still, June FOMC run up would be played through verbal tightening masterfully whether any hike comes or not, mark my words.
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