Hawkish comments from Federal Reserve Chair Jerome Powell sparked Wall Street selling on Tuesday, as hopes further dimmed that the central bank would be able to halt its interest rate hiking in the near future. Powell's testimony reminded markets that the Fed is hell-bent on pushing inflation to its elusive 2% target rate using its primary monetary policy tool, the Fed Funds Rate.
Even though inflationary pressures are a supply-side economic issue, the central bank seems willing to trade a recession to lower inflation. While the central bank has been consistent, markets have been fighting the Fed.
The realization that rates will continue to rise caught up with markets on Tuesday.
With the latest remarks from Powell, the market is now pricing in a nearly 71% chance that the Fed will raise its key rate by 50 basis points at its next policy meeting.
Chart: SPX daily and 15 mins
Monday's shooting star was a clear sign of correction as mentioned, but Powell's testimony has absolutely aimed the selling. The breakdown of Monday's low was a confirmation of shooting star selling, what I expected was the SPX to correct back to the 4020ish level and hold above this level after market close. However, Powell's testimony made the market kinda fight the Fed and start selling off, the momentum gap from last Thursday has been filled and yesterday's close was right above 3980ish, which in my opinion is a good sign.
Chart: SPX weekly and 15 mins
Chart: AMD weekly and daily
On weekly basis, the market is still overall bullish, therefore, I am expecting the SPX can hold above 3980ish, and possibly will restest 3980ish in the next two days, but I think it's okay. AMD is still my strong buy, no matter its fundamentals or its techs.
Please feel free to express your ideas and thoughts in the comment section.
Even though inflationary pressures are a supply-side economic issue, the central bank seems willing to trade a recession to lower inflation. While the central bank has been consistent, markets have been fighting the Fed.
The realization that rates will continue to rise caught up with markets on Tuesday.
With the latest remarks from Powell, the market is now pricing in a nearly 71% chance that the Fed will raise its key rate by 50 basis points at its next policy meeting.
Monday's shooting star was a clear sign of correction as mentioned, but Powell's testimony has absolutely aimed the selling. The breakdown of Monday's low was a confirmation of shooting star selling, what I expected was the SPX to correct back to the 4020ish level and hold above this level after market close. However, Powell's testimony made the market kinda fight the Fed and start selling off, the momentum gap from last Thursday has been filled and yesterday's close was right above 3980ish, which in my opinion is a good sign.
On weekly basis, the market is still overall bullish, therefore, I am expecting the SPX can hold above 3980ish, and possibly will restest 3980ish in the next two days, but I think it's okay. AMD is still my strong buy, no matter its fundamentals or its techs.
Please feel free to express your ideas and thoughts in the comment section.
