Jackson Hole Plan

S&P 500 didn‘t break below the 4,110s and the entry to yesterday‘s session made me think the 4,160s would hold. They did, but today, they‘re likely to be overcome as the markets want to anticipate a dovish Fed. While no pivot would be announced or hinted at, the delicate balancing between signs of a cooling economy (housing, manufacturing) and underlining data dependency in the monetary tightening path to reflect incoming inflation data. And as CPI inflation has peaked, this introduces wiggle room that the markets seem quite willing to take advantage of in the short term.

The risk-on move won‘t be shattered by the upcoming (Sep start is almost here) of the $95bn balance sheet shrinking operations. I think the markets would be willing to buy into the dovish interpretation as readily as July‘s Powell Fed funds rate being near the neutral rate remark, and this jubilation can possibly stretch through Monday or until VIX hits the 21.50 – 21 area. While Treasury yields are rising, the stall speed of the USD hints also at a dovish reaction before the big picture takes over. In addition, better-than-expected GDP data would invite speculation that the Fed would be more hawkish than should the economy be teetering on the edge to a greater degree.

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 and Nasdaq

S&P 500 bulls are probing to go up, and broader markets seem to agree with a modest upswing right into the Powell speech. VIX above 23.50 isn‘t likely today, giving a slight advantage to the bulls who would try hard to ignite fireworks on any dovish remark they can later grasp at.

Credit Markets


HYG showed again daily resilience, and stocks were indeed listening as I cautioned you in the run-up to yesterday‘s session, in this analysis. The low volume can though easily usher in decline continuation should the HYG bear flag formation get completed.

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In A Heartbeat
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