Tuesday, October 11, 2022

Morning Note: Fever Pitch

Per yesterday morning's note, stocks staged a turnaround during Monday's session (going from notably red to a little green) upon Fed Vice Chair Lael Brainard laying out the logical case that the tightening already implemented needed time to work its way through the economy, thus warranting caution... That, however, wasn't sufficient to sustain the positive tone, as stocks slipped back into the red by the close.

Charles Evans, for his part, said he'd like to get rates quickly to a level that allows the Fed to pause, and, hopefully, in the process, avoid overshooting... In both cases, the implication was that a pause is perhaps in the not too distant offing... That's not the message we expect from the slate of Fed hawks who've yet to speak this week.

With expectations of a not-cool inflation print this Thursday, along with a generally-hawkish tone from the majority at the Fed, and, not to mention, poor expectations for Q3 earnings announcements, suffice to say that should a black swan (unforeseeable event) come flying through the market this month, it'll favor the bulls. 

I.e., the something's-going-to-break mantra presently rings at a fever pitch; anything bullish right here will come as a surprise, and, therefore, catch some serious money offsides... No prediction here (black swan events are unpredictable)...

From a purely technical perspective, regular video watchers will recognize what are potentially bullish setups on the SP500 hourly and weekly charts below... But keep in mind my constant warning -- that bullish short-term setups are most prone to fail amid bear markets. 

And a bear market is indeed what we're still dealing with right here.

SP500 hourly:

SP500 weekly:

Asian equities struggled yet again overnight, with 13 of the 16 markets we track closing lower.

Europe's largely in the red so far this morning, with all but 3 of the bourses we follow trading down as I type.

US stocks are off to start the session: Dow down 50 points (0.17%), SP500 down 0.53%, SP500 Equal Weight down 0.47%, Nasdaq 100 down 0.73%, Nasdaq Comp down 0.61%, Russell 2000 down 0.56%.

The VIX sits at 33.56, up 3.42%.

Oil futures are down 1.94%, gold's down 0.03%, silver's down 1.09%, copper futures are down 0.10% and the ag complex (DBA) is down 0.24%.

The 10-year treasury is up (yield down) and the dollar is down 0.01%

Among our 35 core positions (excluding options hedges, cash and short-term bond ETF), 6 -- led by uranium miners, AMD, staples stocks, long-term treasury bonds and intermediate-term treasury bonds -- are in the green so far this morning. The losers are being led lower by energy stocks, Albemarle, Disney, Dutch Bros and emerging market equities.

"In trying to calm anxious investors and soothe skittish markets, central bankers are called upon to wrestle with some of the most elemental and unpredictable forces of mass psychology. It is the skill that they display in navigating these storms through uncharted waters that ultimately makes or breaks their reputation."

--Ahamed, Liaquat. Lords of Finance 


Have a great day!


  1. GM Marty: thanks for the updates! UK shocked the market again today. Bearish sentiment is still very high. I agree with the black swan event. Fed’s Loretta Mester speaks today. She is the most hawkish Fed out of all of them.

  2. Quick question of what JPMorgan's Jamie Dimon said that the S&P may fall another 20% within the next 6-9 months depending on the soft landing or hard landing of a recession. What is your opinion?

    1. Dimon's not the best prognosticator of markets... My observation over the years is that he attempts to sway policymakers with his predictions -- I pretty much don't pay attention to his 'market' opinion these days, I am always interested in JPM's numbers and the data they offer up regarding their customers, however... I presume he's pushing for a pivot from the Fed... That said, yes, in a hard landing scenario our 3500 target would be in jeopardy.