Business As Usual
S&P 500 reversed the pre-FOMC decline, and turned up. The upswing didn‘t fizzle out after the conference, quite to the contrary, the credit markets deepened their risk-on posture. I guess stocks are buying the story of 7 rate hikes and balance sheet reduction in 2022 a bit too enthusiastically. Not gonna happen, next quarter‘s GDP data would probably be already negative. Yet Powell says that the risk of recession into next year isn‘t elevated – given the projected tightening, I beg to differ.
But of course, Powell is right – it‘s only that we won‘t see all those promised hikes, let alone balance sheet reduction starting in spring. Inflation would retreat a little towards year‘s end (on account of recessionary undercurrents and modest tightening), only to surprise once again in 2023 on the upside. I already wrote so weeks ago – before the East European events. There wouldn‘t enough time to celebrate the notion of vanquishing inflation.
For now, stocks can continue the bullish turn – just as commodities and precious metals aren‘t asking permission. The FOMC is over, and real assets can rise, including the badly beaten crude oil. Made a good decision to keep adding to the commodities positions at much lower prices (or turning bullish stocks around the press conference).
Let‘s move right into the charts (all courtesy of www.stockcharts.com).
S&P 500 and Nasdaq Outlook
S&P 500 upswing looks like it can go on for a while. It was driven by tech, participating more enthusiastically than value. The conditions are in place for the rally to continue, and it‘s likely that Friday would be a better day than Thursday for the bulls.
Credit Markets
HYG is catching quite some bid, and credit markets have turned decidedly risk-on. It also looks like a sigh of relief over no 50bp hike – the stock market rally got its hesitant ally.
Gold, Silver and Miners
Precious metals upswing can return – and this correction wasn‘t anyway sold heavily into. Needless to say how overdone it was if you look at the miners. $1950s would be reconquered easily.
Crude Oil
Crude oil bottom looks to be in, and $110s are waiting. Obviously it would take more than a couple of days to return there, but we‘re on the way.
Copper
Copper is rebounding, and even if other base metals aren‘t yet following too enthusiastically, $4.70 isn‘t far away. Coupled with precious metals returning to more reasonable values, the red metal would continue trending higher.
Bitcoin and Ethereum
Cryptos are leaning risk-on, and the bulls will close this weekend on a good note. Today‘s price action is merely a consolidation in a short-term upswing.
Summary
S&P 500 bulls got enough fuel from the Fed, and the run can continue – albeit at a slower pace. Importantly, credit markets aren‘t standing in the short-term way, but I think they would carve out a bearish divergence when this rally starts topping out. I‘m not looking for fresh ATHs, the headwinds are too stiff, but as stated within today‘s key analysis, the tech participation is a very encouraging sign for the short-term. The dollar indeed didn‘t make any kind of upside progress to speak of yesterday – and as I have also written at length in yesterday‘s report, the pre-FOMC trading pattern in real assets can be reversed now. Long live precious metals, oil and copper gains!
Thank you for having read today‘s free analysis, which is available in full here at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Thank you,
Monica Kingsley
Stock Trading Signals
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mk@monicakingsley.co
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All essays, research and information represent analyses and opinions of Monica Kingsley that are based on available and latest data. Despite careful research and best efforts, it may prove wrong and be subject to change with or without notice. Monica Kingsley does not guarantee the accuracy or thoroughness of the data or information reported. Her content serves educational purposes and should not be relied upon as advice or construed as providing recommendations of any kind. Futures, stocks and options are financial instruments not suitable for every investor. Please be advised 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 make. Investing, trading and speculating in financial markets may involve high risk of loss. Monica Kingsley may have a short or long position in any securities, including those mentioned in her writings, and may make additional purchases and/or sales of those securities without notice.
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Yes, Key is not to hold or marry a position : holding an open mind and to pivot in the direction of the inflection pt as it occurs: the criteria for the decision must be discretionary based on selected indicators. Note: It is easy for a human being to recite the alphabet from A-Z, but it you ask a human being to recite the alphabet backwards from Z-A, it is next to impossible, as opposed to an AI algorithm which can reverse based on instructions:
It requires great mindfulness: On one day charts I see I see you use CCI, Slow Stochistic, as well as MA 50 and 200 to illustrate your points.
I suspect you have many other tools such as volume delta, market profiiles. etc.
Best to U and Good trading
Fred
Sure Fred, it's only optimal to be adaptive and to look at breadth of tools. All the best.
Hi Monica: Your "manner" attracted my attention, via a recent post on Barchart.com.
As a result I signed in today.
Best wishes,
Fred
March 19, 2022
* old guy with a pension for looking for pts. of inflection based on technical patterns, reversion to mean
In my own words: By Fred Naef, Friday, February 04, 2022,
See below (copy right remains in effect). To be shared with permission by interested parties/
Reversion in short term Market fluctuations, reflects the statistical phenomenon of Key Inflection Points in response to catalytic outside events such as news, earning releases, rumors, political crises. Given the uncertainty of the market participants to the catalytic force of the event, the result is more frequent inflection points as the market reaction unfolds.
We can frequently observe that the statistical phenomenon called “reversion to the mean” occurs, which stated mathematically: the greater the deviation of the variate (the market), the greater the probability that the next measured variate will deviate less far.
In other words, an extreme event (market reaction) is likely to be followed by a less extreme event, resulting in a reversion to the mean density as it integrates from one interval to the next.
Best wishes,
Fred dated March 19, 2022
Hello Fred, thank you and welcome. Of course what you're saying, is perfectly applicable… most of the time. I can't help to think of LTCM, and then the seismic events of 1998. What's now seismic, is it enough? I think so it is…