S&P 500 duly gave up on the weak Thursday‘s rebound, and bonds cratered as Treasuries aren‘t yielding on the Fed tightening expectations. There is an almost 70% probability of a 75bp hike coming next in September. The Fed would likely pause then, and I‘m looking for 25bp in November, with tightening continuing on the balance sheet shrinking front. Late in the week, Jackson Hole would set the tone, but given the array of Fed speakers late in the prior week, we can look forward to a serious economic slowdown, which would be by definition necessary to bring down inflation fast from these lofty levels.

And we‘re seeing more than early signs of that in the (very much slowing) real estate market, and (sharply rising) utilities. I take that as a scream that interest rates are getting too high for the weakening real economy, and it would show up fast not just in the 10-year yield. Last week‘s data from the UK and Germany reveal that U.S. earnings won‘t escape unscathed – it‘s a matter of time before not only E but also P/E comes down more meaningfully. Meanwhile, the yield curve inversion signal (chart courtesy of St. Louis Fed) keeps its cool…

To feel the daily pulse, let‘s move right into the charts (all courtesy of www.stockcharts.com) – today‘s full-scale article features good 6 ones.
 

S&P 500 and Nasdaq Outlook

S&P 500 downswing quickened, and while it‘s still relatively orderly, the rising volume is favoring the bears this week as much as the deteriorating market breadth or AAPL with TSLA ripe for a serious pullback.
 

Credit Markets

Fine picture in bonds if you are a bear – even more so than it was after Thursday‘s closing bell. HYG is likely to correct some more, especially if the hawkish Fed messages get some more attention – it‘s clear the Fed is taking inflation more seriously now.
 

Bitcoin and Ethereum

Crypto weekend is over, and it‘s back to the downward pointing trend. Let the open profits grow!

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