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S&P 500 took decisively to the downside late yesterday, and credit markets followed. No risk-on positioning, but selling across the board broadly translating into stock market weakness. Great for the bears, let the open profits grow.
How about today‘s CPI – would the reasonably hot data be viewed as an opprotunity to buy? Very counterintuitive but the dip buyers also appeared right after yesterday‘s open. My primary scenario remains that any buying would fizzle out as we have lower lows to make still in this downswing – nothing against bear market rallies, but we‘re too early on in the tightening, and there is still much focus on inflation as opposed on the increasing real aconomy pain when manufacturing growth can grind to a standstill over the next few months easily.
The tough headwinds in positioning for today, can be seen in precious metals and cryptos – setbacks in both as the market pressure on the Fed to raise, goes on. Even the ECB indicated that it‘s a journey beyond July – big words from eurozone on sunsetting negative interest rates. Coupled with crude oil resilience around $122, the odds continue favoring stock market bears.
Before wishing you a great weekend, two charts to illustrate that amply – stocks:
and bonds:
Related: The Horns of Fed‘s Dilemma