In mid-August, the S&P’s failure to get through its 200-day moving average at ~4330 resulted in the reemergence of broad-based short selling with several sub-sectors back to year-to-date highs in terms of short interest.
The oversold equity rally continues with the S&P 500 (SPX) currently trading above pattern resistance in the ~4020-4040 range. A close above that level would open the door for a test of the pre-Jackson Hole level of ~4200. Stronger secondary resistance sits in the 4280-4320
Short-term oversold conditions and an emerging peak-central bank theme have managed to hold the S&P 500 above technical support at ~3900. Prior support at ~4100 failed after terminal rate expectations approached 4% (now 3.93%) in the wake of Powell’s more hawkish Jackson Hole address in
The S&P 500 (SPX) held technical support at ~3900 yesterday and sits at the lower end of a ~3900-4300 range. Closing levels below 3890 would likely lead to a full retest of the June lows at 3660. Closing levels below 3890 would likely lead to
This week includes a number of industry conferences where management teams will provide updates: 1) Bank of America gaming & lodging; 2) Bank of America media, communications and entertainment; 3) Barclays Consumer Staples; 4) Barclays Energy; 5) Citigroup Tech; 6) Evercore ISI Tech, Media and
The Fed has been clear it wants to see a slowdown in labor markets before it changes its tightening path. Today’s increase in the Unemployment Rate to 3.7% from 3.5% and the small downtick in wages (+5.2% YoY vs. consensus for +5.3%) are steps in
The Fed has been clear that it wants to see some cooling in labor markets. Consensus for tomorrow’s release of August payrolls is looking for +300,000. A number resembling yesterday’s ADP private payroll adds of +132,000 would take bond yields lower and equities higher.
The pace of rate hikes hasn’t really changed with markets still pricing in nearly the same probability for a 75bp September hike post-Jackson Hole. The terminal rate is also little changed, up from ~3.62% to 3.73% post-JH.
The path of least resistance has been lower since the S&P 500 failed to break through the 200-day moving average (popular CTA trigger) at 4320. Note that the 200-day moving average is downward sloping, which has taken the goal posts down to ~4300.
Powell’s central message on Friday was that interest rates may need to stay at elevated levels longer than current market expectations.
