Image Source: Unsplash
 

Today‘s S&P 500 analysis will be short as the price action is unfolding as anticipated – stocks made an inroad into the key 3,795 – 3,810 zone (actually a couple of them), and after prolonged overnight consolidation right below, turned somewhat south only to move back up again. So much for price behavior in the vicinity of strong resistance – we have to wait still whether it plays out later on as favored by the odds.

Intermarket though, the modest 500-strong index decline is a bit odd as it‘s accompanied by a retreat in both yields and the dollar (that alone would favor higher stock prices). The USD behavior isn‘t that strange though as I‘ve mentioned the greenback within yesterday‘s extensive analysis:

(…) What has become concerning on Friday though, is the dollar‘s daily session – not even sharply higher yields have worked to keep it afloat.

What was a consolidation before another upswing, risks becoming a period when the dollar starts declining, which is a recognition that the Fed and most global central banks‘ tightening strains created and manifesting, won‘t remain overseas, but would reach the States as well. While not enough cracks are emerging, both the U.S. and global leading economic indicators are projecting a picture of guaranteed recession – with the only questions being its severity and duration.

The dollar‘s daily showing isn‘t thus so surprising – at least TLT declined into the close yesterday. What I would be watching out for keenly today, is dialing back of risk sentiment, which should be seen also in commodities, precious metals, and cryptos ideally, not just in various junk bonds. Quoting again from the above Monday‘s analysis:

(…) Technically for S&P 500, unless the 3,795 – 3,810 zone is broken, the bears hold the upper hand. The appearing cracks, the financial stress in the system as shown in CDS or USD swap facilities being drawn, would hold the upper hand in this headline sensitive risk-on rally that‘s trying to front run the Fed without evidence that the Fed is actually at least pausing. That would prove the (otherwise seasonally justified rally‘s) undoing, with more pain to come early 2023.

The contact and price behavior at the resistance zone before AAPL reports would be key for the fate of this – by now feeble still – counter-trend rally within the context of a larger bear market. Premarket action in real assets bodes well for the bears in stocks so far (3,680, even better 3,660 is the support that needs to be taken out for the bears to regain initiative even before Thursday), and I‘ll be watching and commenting on bonds and forex action as the regular session starts.

Keep enjoying the lively Twitter feed serving you all already in, which comes on top of getting the key daily analytics right into your mailbox. Plenty gets addressed there, but the analyses (whether short or long format, depending on market action – today short) over email are the bedrock, so make sure you‘re signed up for the free newsletter and that you have Twitter notifications turned on so as not to miss any tweets or replies intraday.

More By This Author: