© 2023
The SPX -72.20 gapped
down at the open and traded lower forming a large red candle for the second
day. The SPX closed below four-week
support on August 18.
Breadth was weaker and more negative on Thursday, a day after
Powell’s FOMC press conference Wednesday afternoon.
QQQ and SPY continued to fall and produced a large red
candle for a second day.
In my view, Wednesday’s market reaction during the press conference, overnight
and Thursday was clearly a reaction to not what was said but what was imagined.
One headline today included this, “Also weekly
initial jobless claims data came in below estimates, which could potentially
encourage more rate hikes.” (Emphasis added). Will the September 21 weekly jobless claims
influence the next Fed decision on November 1? Will it influence
multiple rate hikes? The
inference is that a single data point “could potentially encourage more rate
hikes.” Notice they use the plural rate
hikes, that of course, means more than one.
If you don’t know the answers, for the sake of
brevity, here are just two portions of Powell’s opening statement at the press
conference. You could read all four pages
of the opening statement if you prefer.
“Nevertheless, the process of getting
inflation sustainably down to 2 percent has a long way to go. The median
projection in the SEP for total PCE inflation is 3.3 percent this year, falls
to 2.5 percent next year, and reaches 2 percent in 2026."
"If the economy evolves as projected, the
median participant projects that the appropriate level of the federal funds
rate will be 5.6 percent at the end of this year, 5.1 percent at the end of
2024, and 3.9 percent at the end of 2025. Compared with our June Summary of
Economic Projections, the median projection is unrevised for the end of this
year but has moved up by 1/2 percentage point at the end of the next two years.
These projections, of course, are not a Committee decision or plan;
if the economy does not evolve as projected, the path for policy will adjust as
appropriate to foster our maximum employment and price stability goals. We
will continue to make our decisions meeting by meeting, based on the totality
of the incoming data and
their implications for the outlook for economic activity and inflation as well
as the balance of risks.” (Emphasis
added.)
Based on the Committee’s current projections, the
expectation is for one more rate hike this year, which is unrevised from
June. It means this is NOT new
information. Also, this is not a
decision or plan, just an expectation, forecast or as James Bullard
described the SEP in January 2023 in a WSJ live event, a "guess."
The Committee currently expects to achieve the 2%
inflation objective and they expect rates to be lower at the end of 2024
compared with the end of 2023.
The market seems to be reacting to an
expectation of more rate hikes, which at this point is an unfounded (not
supported by the facts) fear, worry, speculation or subjective guess. Apparently, Sgt. Joe Friday doesn’t show up
on Wednesday or Thursday. How about tomorrow?
There is more that I could say about the news coverage
and market reaction, but you would be well served to read or listen carefully to
the press conference and pay attention to what was said, instead of the
subjective commentary that fills the live news feed. FWIW.
Mega
caps MSFT, AAPL, META, GOOGL, TSLA, NVDA, AMZN fell
on Thursday.
SPY down 7.25 at 431.39, on 103.8 million
shares, above average volume, closed lower on higher volume.
VIX up 2.40 at 15.14
QQQ down 6.68 at 357.86
UNH, DIS, INTC, TRV led the DJIA, 2 advancers, -7
FDX, FOXA, VLO, CNC led the SPX, 37 advancers
KHC, ENPH, VRTX, EBAY led the NDX, 6 advancers.
The two-year trend term is sideways. The
one-year trend is up.
Up:
Down: DIA, IWM, SPY, QQQ,
All eleven sectors were lower on Thursday, down the least were XLV, XLU
and XLC.
The SPY
MFC green line is pointed down at 35.2 and is short-term
bearish. SPY opened lower
and closed lower.
Wednesday and Thursday’s
SPX 113-point broad market selloff has contributed to a shift downward in
sector trends:
Uptrend sectors: XLE, XLC,
XLF,
Neutral sectors: XLY, XLV, XLK, XLI, XLB, XLU
Down trend sectors: XLRE, XLP,
The 6-month intermediate
trend is up. The ten-day trend is down.
3-month Intermediate Term Market
Trend: Sideways
3-day Short Term Market Trend: Down
6 of 100 NDX stocks
closed higher on Thursday.
21
NDX stocks are above their 30 DMA: CEG, SGEN,
VRSK, CTAS, MU, PDD, CRWD, TSLA, AMGN, EXC, TMUS, CHTR, COST, GFS, HON, AEP,
CSX, KHC, VRTX, XEL, EBAY,
NDX Stocks to Watch on Friday:
Moving Above 30 DMA = 0
Moving Below 30 DMA = 20
ABNB, ADBE, ANSS, CDNS, CSGP, FANG, GOOGL, INTU, KDP, LULU, MDLZ, META, ORLY,
PANW, PCAR, REGN, SNPS, TEAM, WDAY, ZS,
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