A 'taper tantrum' may already have occurred as the Fed held markets very much in a 'hostage bind', which is now reflected by hints at their concerns. If anything this may move the Fed towards 'smaller increments of hikes', which already is giving the market some sense of relief. So we got S&P extending.

The market has been telegraphing to the Fed that they can't wait lots longer if they want to sidestep a liquidity crisis (and there are no assurances that such is not already an unfolding risk that hasn't quite make 'headline shocks' .. yet).

So in that regard it seems encouraging, and supported our recent idea S&P in a way was 'carving out' an erratic slightly rough bottoming formation; for at least a rebound; with time required both for Fed decisions, year-end selling of course; and who knows with regard to the war (we hear Putin 'wants' talks). 

The lack of liquidity and volatility of credit is there; and the Fed absolutely has to see the risks of overstaying their 'snugging up course'. And stocks reflect a preference for the Fed to 'chill' with their zeal; and some Fed-heads seem too also. But the real clue for us to be more optimistic days ago was not just UK's flip (and scandal); but knowing how rare any move is not coordinated with the U.S. Fed, we took the signs from London and Tokyo as telegraphing probable 're-considerations' by the Fed; as well as our 'debt service' question, which for awhile now has suggested they were bluffing about tightening much further.

As to the small stocks, it can be said equities aren't yet safe when combined it seems with the macro global issues; but so many seem 'sold-out'. Whether of course they survive is a stock by stock situation; which will be pending awhile. 

In sum: the Fed can't let rates get totally out-of-control; and in that respect is also held hostage by this situation. We can't affirm that the Fed is going right to a 'pivoting' approach; but we can see them pausing rather than hiking lots more 'after' this next rate hike.

We have to anticipate yet another rate hike; but not necessarily a lot more. It might be sufficient to mollify markets and also not trigger a huge S&P rally at the same time; just a modest stabilization effort. Questions remain; and huge upside lunges might be something a ceasefire in Ukraine could engineer.

The Fed-heads that think the risk is 'doing too little' are like a colleague or the close 'supposedly caring' relative who 'gives' heart attacks, rather than gets one. They need be more concerned about economic stabilization, not teaching monetary policy lessons to the bifurcated society that really is challenged.

Penalizing growth and going from one extreme to another (excess stimulus to excess ease) was understandable at the height of pandemic; and the basis in fact for my "Inger Bottom" of March 2020. But they overstayed behind a curve as noted for months; and now risk doing the opposite which is too stunning to many businesses; especially small (most non-public) businesses.  

Assets repriced this year; and everyone hopes the Fed is now having what is called a 'two-way conversation'. Sure, the way the Index is zooming higher; if history is a guide, the Fed might get stubborn and fight it or that reason.

We would like the Fed to return to responsible reflections on data; and we don't know at this point if they'll do that; or if inflation is 'really' spiking and settling. If I view transportation (goods not people) or Fuel, it affirms diminished inflation. Also if China really is easing Covid restrictions, that would help significantly. 

Forthcoming week there are a number of major earnings reports; and yes it is somewhat similar to how we developed the June lows leading into July as we looked for. We viewed this as an irregular bottom; with a failing washout from 'automatic rally', but the ensuing drops were more consolidations than new declines, so we got more enthused for what has happened.

We could have a mixed bag ahead on those earnings; on the Dollar; and for sure what might happen in the U.K. or for that matter talks or destruction in Ukraine, as the barbarity of Putin's war needs to come to an end. Some say he wants 'talks' and that might be his only exit strategy (at least exiting alive and even that is uncertain). Corporate guidance probably matters most over the next few days..

Bottom line: Many companies have or will cut outlooks; and pressures are especially noted in discretionary consumer areas; despite some analysts that often suggest the opposite. They can't perpetuate the consumer growth story if rates continue to firm; although I suspect the Fed is approaching their target level, that I thought for business would be in the 4-5% level. More is excess.

More rumors of Fed-heads that want to wait; no idea other than they know all about the Money Supply and Debt Service issues. That's why I've suggested a calming; and maybe friendlier tone, even if they stay at the higher levels (as I also suspect they will for some time; then take undeserved credit when price levels for goods falls back naturally over the months ahead). 

So we've had a good 'relief rally'; and there is the possibility for more; but next week that might come down to special situations and reactions to news and a slew of earnings and guidance releases; not the general drama we just saw. 

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