Hawkish Conference
S&P 500 was indeed sluggish into the FOMC only to welcome the statement – and then the presser came, with acentuated hawkishness that did sink not only stocks, but also bonds and real assets. The encouraging reprieve on the long end of the curve is giving way to further flattening, which only serves to highlight tight money circumstances.
In such an environment, the dollar thrives, and another risk-off day is what we‘re on the doorstep of. The encouraging dialing back of Dec rate hike to only 50bp (assigned 57% probability right after the statement), looks history as bond traders are forcing higher yields across the board today.
On one hand, the impact of rate hikes seems to be generating less fear (selling) since the Jackson Hole and Sep FOMC, on the other hand, it invalidates prior constructive moves in bonds, where especially the long-dated ones look to have bottomed in October. It‘s at least reasonable stability if not a modest upswing (or a more decent one in recognition of slowing economy, which isn‘t yet slowing down fast enough to force yields down on this account) that stocks need for a sustainable Q4 rally – rally that should still continue, and reach my 3,950 year end target.
Volatility and options activity isn‘t though painting a bullish daily picture in the least – bonds are again doing the tightening for the Fed, and it shows in commodities, precious metals and finally cryptos as well. Relatively resilient is of course only oil, and perhaps copper can show limited bouts of relative strength here and there too.
When it comes to daily S&P 500 levels, the bulls want to hold 3,710s, and see any rebound attempts accompanied by risk-on turns in bonds, and I‘m looking more towards TLT today. Overcoming 3,780 seems a pipe dream.
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Let‘s move right into the charts (all courtesy of www.stockcharts.com) – today‘s full scale article features two.
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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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