How About a Bounce?
S&P 500 continued in the post-FOMC direction, and managed to keep above the 3,905-3,910 support. Arguably it could have done better as the bond market retreated from its meekly positive posture only before the closing bell. The buyers didn‘t stage even a dead cat bounce, and that means Friday‘s option expiry day is likely to bring donwside momentum continuation, with 3,880 coming into play should the above mentioned support be not reconquered right after the open.
While real assets held fine on Wednesday, both precious metals and commodities took a heavy daily hit – daily, it must be said. In spite of the rising volume, the dust is likely to settle before Christmas, and both gold and silver (together with copper) are finely positioned for 2023 – to be driven by rising volatility and sticky inflation. Oil is best held only as part of a portfolio with the above three, even if it can deliver a nice upside surprise, such catalyst isn‘t on the horizon, and first there would come the relief rally in USD, pressuring them all.
And this rally can happen even as long-dated Treasuries keep rising to reflect the worsening economic data from housing, manufacturing, or retail sales (the last two confirm the U.S. as firmly on the road towards recession, the subject of Monday‘s extensive article). Final point worth noting, is the continued steepening of yield curve, and worsening financial conditions. Whenever XLF and KRE don‘t do well, it‘s more than ample warning – and financials belonged to the drivers of this bear market rally, and have rolled over earlier than industrials or materials did. Not a good sight for bulls – as stated yesterday, stock market rips are to be sold.
he decreasing sensitivity to Fed rate hikes, balance sheet shrinking, and financial conditions in general, is self evident in the precious metals chart (courtesy of www.stockcharts.com).
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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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