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Upswing Rejection

S&P 500 withstood strong ADP employment change, overlooking soft landing incompatibility and focusing on the no stagflation angle as that was what helped sink stocks Tuesday (ignore crude oil inventories). Both manufacturing PMI and JOLTS supported soft landing, yet stocks didn‘t rally before FOMC.

S&P 500 and Nasdaq daily charts have been both bearish – this is how I summed it up yesterday European morning in our channel.

S&P 500 and Nasdaq

What else to think with yields not really retreating, earnings with guidance mostly underwhelming (even the good ones such as MSFT, KLAC etc get sold – no AMZN to $187) and heavy selling hitting in the final hour of trading (institutional positioning)?

Such was the daily chart and sectoral reasoning yesterday.

S&P 500 and Nasdaq

And then comes the FOMC statement, not bringing in any major surprise. Given the stubborn and not really retreating inflation, the pushed farther away odds of a rate cut (Nov now the base case), the expectations were for not really dovish Powell, especially since he acknowledged no real progress in the taking inflation to the 2% objective. It was likewise surprising that he mentioned not seeing signs of stagflation, in spite of latest GDP, Chicago PMI, both services and manufacturing PMIs and consumer confidence, to name a few.

Instead of bringing up rate hike (while that‘s not on the table for the bond market will do the hiking for the Fed), slowdown as of Jun in balance sheet shrinking (from $60bn to $25bn) was announced. Yields accelerated their intraday retreat, and stocks were first pumped, and then dumped as both the 10y Treasury and EURUSD got second thoughts.

S&P 500 and Nasdaq made daily lower lows, and rejected the upswing that would have changed the technical picture as FOMC days typically have follow through the other day, which is out of the question (there won‘t be overcoming yesterday‘s intraday highs, and once again selling before the close is likely to overpower the prior buyers, resulting in a notable upper knot).

What‘s been most amazing about yesterday, was the willingness and degree of buying into the statement and conference that didn‘t bring any game changer, and objectively wasn‘t a macro bullish catalyst.

As for tomorrow‘s NFPs, I doubt it would come on the cold side given Wednesday‘s employment change – only services PMI have a chance of coming in below 51.

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Let‘s move right into the charts (all courtesy of www.stockcharts.com) – today‘s full scale article contains 3 more of them, with commentaries.

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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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