Pause, But Hawkish

No hike FOMC news was sold, yet S&P 500 managed to recover around two thirds of the initial decline – driven chiefly by tech. The downside though continues in the premarket session, making it reasonable to evaluate the odds of an intraday reversal higher leading to a good retracement.

While ECB is expected to tighten by 25bp, Germany slipped into recession already. Retail sales aren‘t likely to be met with cheering – not even nominal ones. Same store sales view isn‘t encouraging, and in real terms retail sales are down 4% YoY already. Unemployment claims won‘t paint a picture of growith strength in the real economy either.

So, less bad than feared can be the only catalyst – coupled with more wait and see ECB press conference stance leading to one more buy the dip reaction (led of course by tech, communications and discretionaries, with ideally financials, industrials, materials, retail and smallcaps with perhaps a little energy joining in).

The dreaded R word (recession) isn‘t yet thrown around, but that would change over the next up to two months. For now, it‘s still reasonable to expect ES September contract to make a push above 4,440, but the upswing‘s remaining time can be probably measured in weeks (around 1, max 2) as real assets aren‘t cratering (it‘s normal for PMs to decline on a „tightening surprise“) and USD isn‘t truly rising against euro.

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Let‘s move right into the charts (all courtesy of www.stockcharts.com) – today‘s full scale article contains 5 of them.

S&P 500 and Nasdaq Outlook

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ES broke below 4,410, but I don‘t think 4,380 would be broken today – either late today or during tomorrow‘s quad witching. Till Monday, return to 4,420 is likely unless tech disappoints tomorrow – and market breadth is setting stocks up for a stabilizing rebound Friday.

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FOMC delivered shot across the bow, but I don‘t think we have seen the top – we‘re approaching it, but not yet there – later next week is a better candidate for that than this one.

Gold, Silver and Miners

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PMs correction hasn‘t yet run its course in time, and $1,930 and $23.15 as first serious support levels still loom, no matter relative copper resilience (which is also making a case against panic in stocks right now).

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