Stock market forecast: so much for the Hawkish Fed
So long – or rather (as if it were even true). If there was one thing June FOMC showed us, it was the power of (cheap) conversation. We have come a long way since inflation (gotten out of hand) was acknowledged – yesterday we were hit with very aggressive taper plans of 10-15bn. Coupled with the few and distant rate hikes on the dot chart, something seems lazy to go.
While progress in the recovery of the real economy has been recognized (how does that relate to GDP downgrades and others macroeconomic realities, which I addressed in my detailed analysis yesterday?), I think the bar is a bit too high.
Almost as if you wanted to give a (valid) reason why you shouldn’t rejuvenate yourself next. And the theater of the taper on-off, also known as the jawbone, could go on in response to the markets’ response to this fragile period of economic recovery (marked by mounting deflationary undercurrents manifested in falling government bond yields and contagion risks – make no mistake, Evergrande is this Tip of the iceberg, real estate has been warming around the world in the past 1+ years, and in the US BlackRock has replenished the supply of residential real estate, which underpins high home prices, especially as measured by income). Also, don’t forget about the weak outside farm payrolls when it comes to the list of excuses to choose from.
At the same time, the debt ceiling drama hasn’t entertained us nearly enough. Right, the Fed is projecting an aura of independence, which made a decision in September all the less likely. And who says we lack drama these days?
So the S&P 500 seems to see through the Fed’s fog, but don’t forget the historical tendency for the first day (FOMC day) movement to fade over the next 1-2 days. So I’m looking for some weakening of yesterday’s upturn in both paper and tangible assets. And that includes baking and filling in raw materials, precious metals and cryptos.
Let’s jump straight into the charts (all courtesy of www.stockcharts.com).
S&P 500 and Nasdaq outlook
The bulls are on the move but facing headwinds – more intraday hesitation (an overall positive day with a notable top knot) is expected.
High yield corporate bonds, on the other hand, only held up their opening gains – hesitation remains but bullish sentiment is slowly returning.
Gold, silver and miners
Gold was still stunned by the taper plans put forward, and the miners are waiting for their time. We’re not around the corner yet.
Oil stocks confirmed the oil rally and the black gold chart still maintains a bullish stance.
Copper didn’t really hesitate – the red metal made for another wild boom, but it lacks volume and base and it could take a moment to establish itself.
Bitcoin and Ethereum
Bitcoin and Ethereum rebounded, but the volume could have been larger – what was wrong there could be offset by prices at least above the midpoint of yesterday’s white candle.
The balance of power is shifting to the bulls, who are facing a retracement attempt from yesterday’s rally. Its degree of leniency would indicate what to expect next – what matters is that the dollar gets the message from the Fed (not a hawk) that would serve to cushion any hiccups that will drag the markets down over the next few days .
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All articles, research and information represent analyzes and opinions of Monica Kingsley based on available and latest data. Despite careful research and best efforts, it may prove incorrect and is subject to change with or without notice. Monica Kingsley does not guarantee the accuracy or completeness of the reported data or information. Their content is for educational purposes and should not be viewed as advice or recommendations of any kind. Futures, stocks and options are financial instruments that are not suitable for every investor. Please note that you invest at your own risk. Monica Kingsley is not a registered securities advisor. By reading her writings, you agree that she will not be held responsible or liable for any decisions you may make. Investing, trading and speculating in the financial markets can carry a high risk of loss. Monica Kingsley may have a short or long position in securities, including those mentioned in her writings, and may additionally buy and / or sell such securities without notice.
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