Jackson Hole Plan
S&P 500 didn‘t break below the 4,110s and the entry to yesterday‘s session made me think 4,160s would hold. They did, but today, they‘re likely to be overcome as the markets want to anticipate a dovish Fed. While no pivot would be announced or hinted at, the delicate balancing between signs of a cooling economy (housing, manufacturing) and underlining data dependency in the monetary tightening path to reflect incoming inflation data. And as CPI inflation has peaked, this introduces wiggle room that the markets seem quite willing to take advantage of in the short term.
The risk-on move won‘t be shattered by the upcoming (Sep start is almost here) of the $95bn balance sheet shrinking operations. I think the markets would be willing to buy into the dovish interpretation as readily as the July‘s Powell Fed funds rate being near the neutral rate remark, and this jubilation can possibly stretch through Monday or until VIX hits the 21.50 – 21 area. While Treasury yields are rising, the stall speed of USD hints also at a dovish reaction before the big picture takes over. In addition, better than expected GDP data would invite speculation that the Fed would be more hawkish than should the economy be teetering on the edge to a greater degree.
To feel the daily pulse, let‘s move right into the charts (all courtesy of www.stockcharts.com) – today‘s full scale article features good 6 ones.
S&P 500 and Nasdaq Outlook
S&P 500 bulls are probing to go up, and broader markets seem to agree with a modest upswing right into the Powell speech. VIX above 23.50 isn‘t likely today, giving slight advantage to the bulls who would try hard to ignite fireworks on any dovish remark they can later grasp at.
HYG showed again daily resilience, and stocks were indeed listening as I cautioned you in the run up to yesterday‘s session, in this analysis. The low volume can though easily usher in decline continuation should the HYG bear flag formation get completed.
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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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