Hello everyone,
I wanted to take a look at the longer-term perspective on the market and what the possibility of a Fed Pivot could look like.
Wednesday we heard from the Fed chair at the Brookings Institution event about the current strategy plan and hints on easing inflation back down to a satisfactory 2% YoY, from the current 7.7%. A number of data prints we have received over the last month showed positive signs inflation has peaked; the talk focused on the likely possibility that the central bank will be able to slow the pace of the current monetary policy, however reminded that the efforts to tame inflation are not done as he mentioned "The truth is that the path ahead for inflation remains highly uncertain... We will stay the course until the job is done".
Markets rose on these comments, the S&P 500 up approx. 120 points (3.10%) and closeed at 4080, the NASDAQ 100 rose 4.58% on the day and closed at 12,030.
However, there seems to be a miscommunication between the equities market and the bond market. Of the majors, the 10Y/2Y yield curve is still inverted, as seen in the chart below.
An inverted yield curve shows that long-term interest rates are less than short-term interest rates. Essentially, what this means is that investors of the bond market are expecting the central bank to cut rates to avoid a recession. With an inverted yield curve, the yield decreases the further away the maturity date is. Historically, yield curve inversions have been proven to have a highly reliable indicator of a recession.
Shorter term bonds, such as the 10Y-3M yield curves are also inverted and continue to invert hereafter.
Markets do not tend to form bottoms before a recession hits, so this data suggests further downside is definitely possible.
It seems we have limited upside, as the SPX has currently fallen just below the 200-day moving average, which has been established as major resistance this bear market. Daily RSI is sitting at a 63 and Stoch RSI at 88, suggesting we may have a short term correction lower in the price. The price is nearing the retracement of 0.786 at 4193 and 0.618 sits at 3813.
Let me know what you think.
I wanted to take a look at the longer-term perspective on the market and what the possibility of a Fed Pivot could look like.
Wednesday we heard from the Fed chair at the Brookings Institution event about the current strategy plan and hints on easing inflation back down to a satisfactory 2% YoY, from the current 7.7%. A number of data prints we have received over the last month showed positive signs inflation has peaked; the talk focused on the likely possibility that the central bank will be able to slow the pace of the current monetary policy, however reminded that the efforts to tame inflation are not done as he mentioned "The truth is that the path ahead for inflation remains highly uncertain... We will stay the course until the job is done".
Markets rose on these comments, the S&P 500 up approx. 120 points (3.10%) and closeed at 4080, the NASDAQ 100 rose 4.58% on the day and closed at 12,030.
However, there seems to be a miscommunication between the equities market and the bond market. Of the majors, the 10Y/2Y yield curve is still inverted, as seen in the chart below.
Shorter term bonds, such as the 10Y-3M yield curves are also inverted and continue to invert hereafter.
Markets do not tend to form bottoms before a recession hits, so this data suggests further downside is definitely possible.
It seems we have limited upside, as the SPX has currently fallen just below the 200-day moving average, which has been established as major resistance this bear market. Daily RSI is sitting at a 63 and Stoch RSI at 88, suggesting we may have a short term correction lower in the price. The price is nearing the retracement of 0.786 at 4193 and 0.618 sits at 3813.
Let me know what you think.
Comment:
Price reached top of upper trendline and instantly rejected on the 13th, dropped back into main falling channel. RSI just hitting overbought. Not a good look for the bulls.
Comment:
Price reached 0.618 retracement and bounced, should be able to ride this to 20 MA (3962) which is where I'm looking for the main rejection. Gonna keep an eye on this.
Comment:
Set my eyes close at 3960, tomorrow (as suggested by futures) we can finally see actions past consolidation at the 0.618.
Comment:
Gap filled and rejected 200D MA, also completed RS of 3900, 4080, 3980 H&S formation. Continuance lower very likely.
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What we can say for a fact is we have closed daily outside firmly above the main downtrend holding the price down since March '22, a bullish development. We are well above the SMAs. But don't get too exited. We may be in a b wave of Elliott wave theory, meaning upside is more limited than you think. I see a move to the 0.786 as likely. I'm not trading much in this zone.
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Comment:
Almost look ready to go
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As expected, a continuance higher unfolded. Seems we are close to a local high, expect 4150 to show strong resistance.
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4150 hit.
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And a doji to close the market.