Powell Fears
S&P 500 continued with Friday‘s momentum with barely a consolidation – until Fed‘s Daly spoke. I warned, and the sellers overcame 3,910 eventually. The Fed isn‘t done yet, and Daly didn‘t disappoint (if you remember her earlier appearances).
Aftermarket, I recapped the sectoral view, which doesn‘t paint a conclusive picture for the index, and similarly the bonds. Ultimately, it comes to just how much are the markets willing to doubt and defy the Fed.
As stated yesterday:
(…) Where does that leave us? With more prospects for LEIs moving lower, real estate declines, earnings downgrades and ultimately unemployment increase.
All in the name of fighting inflation, after the transitory debacle I called Apr 2021 vocally. Now, the Fed is to keep tightening into a slowing economy (and ready to overdo it), and its targets of CPI below 5% in 2023 and at 2.5% in 2024, are too rosy.
Apart from the shape of the recession, and how well it would be cushioned by the U.S. consumer (look at confidence, expectations, retail sales, deliquencies etc), the key questions are just how far the Fed would take the Fed funds rate, and how long it wishes to keep it at its own evolving definition of a restrictive level.
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Let‘s move right into the charts (all courtesy of www.stockcharts.com).
S&P 500 and Nasdaq Outlook
After the 3,895 – 3,910 zone, there comes 3,875 – the level that wouldn‘t arguably mean a return to the long Dec range. Much needs to happen, especially overcoming Powell hawkishness (in due course) next.
Credit Markets
Bonds aren‘t throwing in the towel, and until I see HYG dramatically retreating on solid volume, the SPX bulls aren‘t done.
Gold, Silver and Miners
PMs aren‘t tanking from here – the selling pressure would remain limited and temporary.
Crude Oil
Crude oil stocks are in better shape short-term than the commodity itself. I told you $78-80 would be hard to reconquer.
Copper
Copper remains a bright spot, and the break out of the consolidation preceded by the Oct tremors that I considered fine enough to be bought into, are paying off handsomely. Base and precious metals are those key assets to be in!
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Monica Kingsley
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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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