Recall from Monday's note:
Nasdaq 100 Non-Commercial Traders Net Futures Positioning:
I.e., the bears are still sticking their necks out there -- risking getting their heads handed to them if indeed the Fed delivers a dovish message... I.e., that "huge short-covering if they come in dovish," will serve to add a not-small upside boost to stocks in that scenario...
Here's today's Nasdaq 100 1-minute chart... The red X marks 5 minutes into Powell's press conference:
Yep, call it a dovish message, and, yep, call it yet another short-covering rally.
Not sure dovish. The market definitely turns a deaf ear on Powell. It doesn't matter whatever he says; the market will do what it wants to do. Time will tell if the market is right. I still think that fighting the Fed is never a good idea.
ReplyDeleteI don't know Sam, he mentioned "disinflation" several times, and he actually kept saying "financial conditions have tightened" significantly, despite the fact that they've eased considerably to the point that they're virtually as loose as they were a year ago... That's essentially dovish -- especially the denying that conditions have eased of late...
DeleteNow, I agree, there was some hawkish language, but it was essentially the language from previous press conferences... However, in those he wasn't suggesting any disinflation occurring whatsoever... That, and his complete rejection of easing conditions, is what the market keyed on...
Bottom line for the market setup going forward is whether or note we roll into recession, and, if so, will earnings do what they typically do during recessions? If we don't see recession, that 3,500 from October was the bottom... If we do see recession, it's highly likely that the bear market low isn't yet in... Our assessment still says odds favor the latter.. We'll see my friend.
Agree! Thanks Marty!
DeleteMaybe 3,500 from October was in fact the bottomed. However, with the current given macroenvironment, I, in my opinion, highly doubt that it is the case. I recently read a story about a software engineer named Vincent Siew on LinkedIn. He worked for Google and recently got laid off as one of the 12,000 employees that got laid off. It was a shocker to him, especially when he had to explain to his son why he got laid off and why he would no longer bring home the Welch gummy bears (Google offers perks for employees. Gummy bears were something that Vincent brought home to his son from work. It was touching that he wrote it in Chinese that: "the company doesn't want daddy, and daddy no longer wants the gummy bears"). The thing that interested me was that he really thought Google, as a big Tech firm, could navigate through the current downtrend of macroeconomics.
You have been right all along that investments should be at a macro-level in lieu of a regional level. Recession depends on many factors. One of the factors is unemployment. The current level of unemployment is 3.5% with 11million job openings in December. If we start having high unemployment, a recession is likely to happen. We will see how the rest of 2023 plays out.
Thanks for sharing that Sam. I feel for Vincent! With regard Google, and others, today's big-corporate compensation structure has basically turned CEOs into (as Julien Brigden puts it) little more than "shepherds of their stock price." The minute earnings, and therefore, their stock price, is in jeopardy, they start cutting, and of course labor is where they can get the biggest short-term bang for their buck.
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