GDP-BoJ Punch

S&P 500 continued the post-FOMC risk-on turn accompanied by stable to retreating yields until above expectations GDP figure spurred bets on soft landing having been achieved, and on more Fed tightening – regardless of the fact that LEIs keep declining still, making it impossible to talk about any landing. It‘s always these times before recession actually arrives when it appears that economic contraction has been avoided. Disregard the overly optimistic earnings growth expectations as of Q4 2023, or real estate recovery starting to falter.

The key event yesterday was – testing the market reaction rather than a trial balloon, it turned out during the Asian session – the intention of BoJ to adjust the „permissible“ yield on Japanese Government Bonds upwards from the 0.5% band. Yield differentials between Treasuries anf JGBs directly influence the yen carry trade, and exert influence on interest rate sensitive assets from Nasdaq to gold.

The resulting relaxation of the yield curve control in place caused gyrations in Nikkei, USDJPY and Treasuries alike, yet without any panic. The dip was being quite orderly bought, but I‘m looking for core PCE data to take us back into the tightening focus in bonds that have advanced quite much premarket.

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Let‘s move right into the charts (all courtesy of www.stockcharts.com) – today‘s full scale article contains 2 of them.

S&P 500 and Nasdaq Outlook

S&P 500 and Nasdaq

Initial selling attempt, but stocks are unlikely to be thrown off guard during the regular session – on a daily level, the deeply oversold many cyclicals, are to catch a bid, and unless bond yields accelerate their bite (rise) during the regular session, tech isn‘t likely to yield (face rotations out of). 4,585 – 1,592 zone holds the key today, and buyers are more likely to reclaim it than not.

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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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