“Again, Risk & Rotation are still on!” — Paul Ebeling
What happened last week: Quad Witching, that’s what!
Stocks started weak, then growth surges and recovery/industrial stocks sold. Growth stocks led North into June options expirations and the start of Summer time for stocks, traditionally slow.
On the FOMC’s perceived hawkish stance, USD jumped, gold fell, T-bond yields moved down and growth stocks show power because growth is a low-interest-rate trade.
The Big Q: Did the Fed tighten with the reverse repurchase agreement market?
The Big A: No
The Fed pushed out its interest rate hikes into Y 2023. That is not “tighter”, it means a years more of QE, that is $1.5-T, at the current levels of purchases. That is no reason to declare “tightening”
Charts are Bullish to Very Bullish long term, and there is deep support and light to no overhead resistance. The candlesticks patterns are positive.
Looking at the S&P 500 chart: The index fell significantly during the course of “quadruple witching” Friday, with it Noise!
So, if I see break down below the 50-Day EMA it is likely that 4100 would be targeted by support, just as the 4000 mark will be with a massive gap there. The action was a simple pullback despite the drama crossing the headlines.
A break above the all-time high is a Very Bullish sign and could send this market to 4300, then 4400 as the market tends to move in 200 pt increments over the longer term. If it breaks below 4000 then 1 might be tempted to buy puts.
What to expect this week
We will likely see the US benchmark indexes turn higher this week as they already reversed.
This is a market that cannot be sold despite the overall negative Noise. That being the case we still have a “buy on the dips” scenario, as last wks last minute crowded trade was an overreaction.
Be patience and be rewarded.
Have a healthy week, Keep the Faith!