Will they or won't they
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
S&P 500 is gyrating with the the Fed rate hike speculation – 50 or 75bp? Treasuries are still demanding a higher one now and more later as inflation hasn't even temporarily slowed down. But there was a moderate risk-on turn in bonds, which looks like facilitating the pause within the stock market decline on the FOMC today, meaning we could see a little bounce, which would be reasonable to sell into on its exhaustion (with a tight stop loss unless I change the rough game plan for the intraday traders reading). Things sure start with locking in sizable open short profits.
Precious metals had a bad day yesterday, and together with copper were indeed short-term bearish, but just one Fed meeting would be enough for an intraday reversal (when they announce backing off tightening, float more than gentle focus on supporting real economy growth, or voice concerns about the job market health). Even with their models, this would become obvious just in time for autumn – it must be said though that the current tightening (and markets frontrunning that especially) is helping to dent commodities, with metals suffering the most. Crude oil looks to be ranging, and a good stop-loss protected open profits yesterday. If you haven't already, please check more on my style and philosophy so as to make the most of the daily analyses.
Overall, I'm looking for a little risk-on reprieve – an upswing attempt unless the Fed turns up with really hawkish messaging that at least meets market expectations. Odds are they would approach meeting these, and how convincing is going to be the message and the delivery, will influence market reaction – I'm not looking for a bullish stunner today, but for a corrective move that goes sideways to a somewhat upwards. That would concern both paper and real assets, together with cryptos (to a lesser degree) in spite of all the Binance issues indicating that much is happening under the surface there.
Finally, remember that no matter how much tightening, markets are forward looking – and those beaten down real assets would just at some point start ignoring higher yields. Even before the Fed telegraphs anything...
Let's get into the key richly annotated charts (all courtesy of Stockcharts.com) for today – stocks:
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