S&P 500 keeps nibbing at 4,040 and while rejected Friday and before, this level would be eventually overcome. Low 4,010s are the support, and the remaining key data of 2022 shouldn‘t force a lasting break. Of course, unless China uncertainty strikes the way it did over the weekend – Asian session understandably took the bulk of the hit but the rush to bonds appears receding for now. Even if S&P 500 buyers would be overpowered right next, the Q4 rally isn‘t over – the headline dust only needs to settle.
Market breadth is improving, VIX is revealing retreating fears, and in general we‘re back to summer bets on less restrictive Fed. Just like back then the negative quarterly GDP print drew focus to the recession now predictions (didn‘t happen), the latest retreat in inflation (with more, lot more to come) is giving rise to similar bets.
Even if the Fed goes only 50bp in Dec (as anticipated long ago) and 25bp in Jan, that‘s still a headwind – it‘ll tip the real economy into recession, no matter how slow they are planning to go now. 5% year end or 5.50% after Mar FOMC – either will do the trick. Yield curve has twice inverted, housing feels that, manufacturing is sputtering, and labor market posture (tightness or hotness, call it whatever you please) will change. Tech layoffs are only a harbinger.
What does it mean for stocks now?
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Let‘s move right into the charts (all courtesy of www.stockcharts.com).
S&P 500 and Nasdaq Outlook
The real resistance is a bit above the 200-day moving average. The spring is coiled, and ready – it‘ll more probably happen on Wednesday‘s GDP than on Tuesday‘s consumer confidence. Sectors featured Friday will do great.
The retreat in yields and general risk-on posture in bonds will continue – Friday was a welcome reprieve. Loaded and ready to go higher in support of the stock market rally.
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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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