Picture Credits

Before we get to Powell, the following is our short and medium term market driver dashboard we show daily to subscribers. Most of our measures are pointing bullish and have been for some time. We turned from bear last year to bull at the end of last year and there appears to be more building confirmation of a nice up move to come and more specifically in the 2nd half.

Here's what we look at.

Stock Market Medium Term Drivers

Annual Technical Bias: (SPY 200 day): Up

Annual, January: Up

EPS Fundamental Bias: Up

Fed Fundamental Bias: Up

Market Sentiment: Sentiment is Bearish, Up

I Think Bonds: Up

Stock Market Short Term Drivers

Monthly Technical Bias: QQQ 310, Up

Action: Slow is Bullish, Up

Weekly Technical Bias: Up

Next Day Technical Bias: Neutral

Overall

Overall Medium Term View (0 – 365 days): Up

Overall Short Term View (0-30 days): Up

This is what I said yesterday to subscribers, "QQQ overbought is washed away so I think that will allow the markets to move up. QQQ led a rally so its technicals are more important for the overall market. SPY closed well so I think the combination means there's more up than down tomorrow."

That was from yesterday. We try to have an opinion on the day, week, month and year and as it starts to line up it gives a trader more conviction to size right.

Powell Clarifies And Expects One More Hike This Year

It was reported on the tape at 1:46 PM EDT that "Powell In Meeting Indicated One More Interest Rate Hike This Year."

Also reported on the tape he apparently said in that same meeting, "Supply Chain Inflation Has Been Mostly Mitigated."

The fact that the supply chain has normalized means that main inflationary factor that the Fed blamed is now out of the way and no longer a driver to inflation.

Powell expecting one more hike is news and clarifies his change in language on the recent Fed day.

The recent Fed day the Fed press release had softer language saying, "some additional policy firming may be appropriate."

That was much softer than the previous Fed day saying, "ongoing [rate] increases."

Today, if reports are correct, that softer language means to Fed Chair Powell one more 25bp hike. That's new news.

It's some news but nothing you can bank on (very sorry for the pun). I've pointed out the Fed's extreme vacillation on their rate expectations in such a short period of time, makes their call-outs worth less. Not worthless but worth less.

The Stock Market Doesn't Agree

Even though Powell thinks he's going to hike again the stock market through the CME futures is pricing in NO more hikes and instead leans to 2 rate cuts later in the year. (read 'em and weep)

One CME rate cut was pushed from July to September.

Fed In An Easing Cycle Is Bullish

I prefer to believe CME much more than Fed expectations. I think the CME is more right than Powell and even though he expects a hike, he's really going to cut two more times instead, as per CME.

I've said that I think Powell and crew are going to start being a little more humble and listen to markets more than they had. Fed regimes of old did pay much more attention to the market expectation.

One rule of trading is don't fight markets. Yes there's 'don't fight the Fed' but if it comes down to markets or Fed I take the market's side.

I think this Fed has shown way too much hubris and been proven wrong many times over. I don't know if they've yet fully come to terms with that which means more Fed estimate mistakes are in the offing. So I take the market's side.

The setup is bullish for markets. Along with a Fed that's in the process of begrudgingly pivoting, we have good GDP, good jobs, Earnings I think turn around by the second half. I think there's coming disinflation prints in April and a backing off Fed. This is a very bullish combination despite that the market doesn't show rip-roaring bullishness.... YET.

But I think it will.

Bullish for SPY, QQQ and markets generally.

More By This Author:

0 Or 25bp Is Not Really The Question. Bullish For Fed Day
Markets Win Kashkari's Game Of Chicken
Caution To The Wind Is Bullish