Fed vs Market
The Market has a nasty habit of getting ahead of itself a la Alan Greenspan's "irrational exuberance."
investopedia.com/terms/i/irrationalexuberance.asp
Right now, the Market is pricing in lower interest rates based on smidgeons of good data, but the Fed has shown no intention of lowering rates yet.
We've seen this pattern before many times but especially in the past couple years. Good data comes out, the market goes bullish, then the Fed stays hawkish, and the market goes bearish. Seems to me the pattern is likely to repeat on Tuesday when Powell speaks. But the market is indeed showing technical strength (see support at Fib levels, plus others have noted bullish RSI, A/D, etc.), and the economy is nevertheless proceeding per the "soft landing" plan, which means a good CPI on Thursday might slow a bearish reaction from Powell.
From there, I imagine another stalemate. There's been a lot of talk of stocks going flat in 2023. I doubt the whole year will go flat, but we'll likely be a bit flat until January earnings start rolling in. That's looking bearish, because why would the Market expect high earnings while at the same time cheering a dull economy with low wages? That's playing both sides, it seems. Plus, again, irrational exuberance.
Furthermore, if we revisit October lows, I suspect a double bottom might occur. We'd be near pre-pandemic levels (the pandemic being what overinflated the market into this hot mess), except we'd be better equipped with data and interest rate outlooks to go up from there. This speculation dovetails with the talk of a short-term bearish, long-term bullish outlook.
To return to technical analysis, it's worth noting that ranges sometimes experience false breakouts. The setup here looks suspiciously like Smart Money doing a liquidity clear out before Powell drops the hammer. Given Smart Money's connections with the media, the general Market hype right now, shifting sentiment from overwhelmingly bearish to neutral, adds to the suspicion of mass market manipulation.
Anyway, I expect a jump up on Monday to near or at the next bullish fib level as everybody hops on the bull train and more shorts get squeezed. Then, I expect a quick dump on Tuesday and Wednesday after Powell bursts the Market's bubble by keeping interest rates the same, probably to the triple fib support we just left. Then, I expect another jump after the CPI on Thursday, if it's good, probably to the next bearish fib resistance. After that, earnings will probably kick us down to October lows, where we will see a double bottom.
Trade at your own risk; I do not offer advice.
investopedia.com/terms/i/irrationalexuberance.asp
Right now, the Market is pricing in lower interest rates based on smidgeons of good data, but the Fed has shown no intention of lowering rates yet.
We've seen this pattern before many times but especially in the past couple years. Good data comes out, the market goes bullish, then the Fed stays hawkish, and the market goes bearish. Seems to me the pattern is likely to repeat on Tuesday when Powell speaks. But the market is indeed showing technical strength (see support at Fib levels, plus others have noted bullish RSI, A/D, etc.), and the economy is nevertheless proceeding per the "soft landing" plan, which means a good CPI on Thursday might slow a bearish reaction from Powell.
From there, I imagine another stalemate. There's been a lot of talk of stocks going flat in 2023. I doubt the whole year will go flat, but we'll likely be a bit flat until January earnings start rolling in. That's looking bearish, because why would the Market expect high earnings while at the same time cheering a dull economy with low wages? That's playing both sides, it seems. Plus, again, irrational exuberance.
Furthermore, if we revisit October lows, I suspect a double bottom might occur. We'd be near pre-pandemic levels (the pandemic being what overinflated the market into this hot mess), except we'd be better equipped with data and interest rate outlooks to go up from there. This speculation dovetails with the talk of a short-term bearish, long-term bullish outlook.
To return to technical analysis, it's worth noting that ranges sometimes experience false breakouts. The setup here looks suspiciously like Smart Money doing a liquidity clear out before Powell drops the hammer. Given Smart Money's connections with the media, the general Market hype right now, shifting sentiment from overwhelmingly bearish to neutral, adds to the suspicion of mass market manipulation.
Anyway, I expect a jump up on Monday to near or at the next bullish fib level as everybody hops on the bull train and more shorts get squeezed. Then, I expect a quick dump on Tuesday and Wednesday after Powell bursts the Market's bubble by keeping interest rates the same, probably to the triple fib support we just left. Then, I expect another jump after the CPI on Thursday, if it's good, probably to the next bearish fib resistance. After that, earnings will probably kick us down to October lows, where we will see a double bottom.
Trade at your own risk; I do not offer advice.
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