Speculation abounds regarding whether we're thrust into a deep recession as the year progresses (actually less likely than many pundits think, although superficial Fed policy sort of advocates for that until they don't need too... in theory), or not. And that was my point last night, about the Fed, not my view.

Freepik

Rather I have a hunch (and that's all it is, although I've seen Fed reversals of policy on a dime before), not for a pivot, but for a 'Declaration of Victory' later this year, as general price levels ease somewhat, although oil & war clearly do have the potential to inhibit that. It would be tough but Chairman Powell at some point needs to be able to 'claim' that the trend is going their way and as the Fed stays 'higher for longer' (which really means 'normalization remains') he can just leave things alone, and let the resilient U.S. economy work along.

There are several geopolitical issues that are challenging this market, including China's disingenuous effort to accuse 'us' of having a 'wrong path' for responsible relations. This is entirely ridiculous, as given the intertwined economic relationships, their (secret speeches aren't so secret since we know about them) goal of 'another world order' is ludicrous as well as imperialistic, and if that is pursued even challenges Russia a bit.

That's why I mentioned how China would 'carve away' some concessions if it really aids Moscow with weapons.. later on. But at this point Russia's people are getting so frustrated and seemingly can see through the propaganda veil so are more resistant to fighting people they consider as essentially brothers. (Oh forgive the lack of wokeness brothers & sisters.) Seriously it's all risky, to me it has shades of the 1930's, and if things 'blow up', clearly prospects for a stock market time of prosperity and calm also would be impacted.

In-sum: 

The S&P remains in the 'aggressively neutral zone overall. Nearly a new high for AEHR, while ON, WOLF, AMD and even SKYT are doing well. This should continue, or perhaps consolidate, for the moment. Mostly interested in the behavior a couple hours 'after' the Jobs number on Friday. More telling as the proximity to the intersection of those Moving Averages remains almost a magnetic attraction which has been deflected from so far.

Of course the speculative stocks are cringing while Semiconductors do well, although there's no association just disparate moves. Remember, a couple of the new 'sprinkled' speculations were entered piecemeal on pullbacks after favorable news. Stocks like BigBear.ai and Terran Orbital both left gaps that are partially filled by trading reversions. It's hard if not impossible to determine 'where' they bottom, or even if they have done so on the pullbacks.

That's why I suggested 'if' playing any of those, enter gradually in portions so the average entry price will look good down the road. Both of those may be interesting for more than a trade, because of both Government and Defense Contractor ties. But it is all speculative and not suitable for lots of investors.

Oscillating in a narrow range much of the session, S&P bounced near the end while a number of our favored Semiconductor and related stocks were firm all day long, despite all the debates about 'economic problems and the Fed'.

Today sees a dominance of bearish views along with a hawkish Chair Powell, but you know so what. We knew the Fed Chairman would persist this way, at the same time the hedge funds and others would generally 'try' to bear stocks.

The market is fixated on data-dependency, and guess what, so is the Fed. So I mentioned that I suspect 'disinflation' will be reported (aside from Oil and of course auto prices, both of which should remain firm into the Spring), and the Fed will 'declare progress', but not victory.

What we get for now is a Bond market celebrating interest rate 'normalization' which I've said before is anywhere between 5-6%. It's the Fed's fault for many years of free money, and they know that even if barely giving it lip-service. In a sense I think the Fed's bark is worse than it's bite, at least for the moment.

Bottom-line: 

The pace of this market is slow and not far from trading ranges we've been in for some time. That's really why VIX is staying pretty low, as well as traders skeptical that the bears are right, one reason being failure to capitalize on the downside when they had a Fed Chairman all-but-declaring recession or mass unemployment coming .. for small stocks we see it behind.

We're only a day away from the Jobs number, and it will probably be solid.

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