S&P 500 Now Breaks Support After a Hawkish Fed Hike

Here is the problem for equities. The market effectively priced one hike. The other two or three, not so much. So for the days and weeks ahead, we could see a continuation of that repricing, and that is not good for stocks. You already have warnings on the equity side with yields where they are.

The S&P is losing the 7,560 to 7,635 support right now, sitting at 7,543. The next support is around 7,320, roughly 3% away. Below that, the 7,200 to 7,290 demand zone.

Bigger picture: the administration has lost the bond market with yields near 5%. The stock market is the last thing on their scorecard it has left. If yields and oil stay elevated, that pressures the very thing it is leaning on.

read the full article here.

— Alan

USD/JPY Daily Chart

With FOMC behind us and more clarity on where the Fed sits, I'm looking to start executing some trades on USD/JPY.

My last puzzle piece is BoJ later this week.

I generally think the carry trade lives on, or even gets better depending on if the 2-3 rate hikes actually develop.

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Gold Rallied After a Rate Hike, Because the Market Doesn't Believe the Next Ones Will Come

Gold is up 2.42% today, the day after the Fed hiked. Higher rates are usually worse for gold, so what is happening?

The Fed hiked yesterday and floated two to three more hikes ahead. But gold is not up because of those hikes. It is up because those hikes may not come. They are entirely contingent on oil, yields, and inflation expectations. And today, oil is trending lower for a second red day, with yields easing on both the short and long end. That says the extra hikes may not make it into the picture, and that is good for gold.

Technically, yesterday it traded down into the 0.618 retracement at 4,241, which lined up with previous resistance turned support, and held. It is rallying off that now. Clear the 0.382 at 4,415 and the 200-day, and the upside really shines.

I am on the sidelines looking for a pullback entry.

read the full article here.

— Alan

EURUSD Daily Chart

Although I'm directionally bearish on USD, I do think it's possible to see some short-term dollar strength. In that case, I'd sell USD on premium prices.

In that case, EUR/USD looks like a pretty good short for the meantime. I like how it broke all layers of defense for the bulls, officially breaching the 61.8% fib retracement level.

EdgeFinder is also showing a bearish reading of -10, which I love to see. Waiting for a specific technical confirmation to give me the greenlight. But I'm intrigued.

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The BOJ Hiked and the Yen Fell Anyway, Because the Fed MIGHT Outpace Japan

USDJPY is up 1.23% today at 157.88, yet the Bank of Japan raised rates 25bp last night to 1.25% and said it is willing to hike more if conditions warrant. So why is USDJPY higher?

I think the market is making a bet. Yes, the BOJ hiked, but so did the Fed, and the Fed's hike was already priced. The extra was that the Fed came out more hawkish than expected. With that comes the bet that the Fed outpaces Japan on hikes. If that is the case, the carry trade does not just live on, it gets better in favor of USDJPY higher. The rate gap widening is why the pair is up.

The hike also carried two dissents, which told the market the BOJ is less united on further tightening than thought.

Technically, price is tapping a bearish trendline plus the 200-day, two layers of resistance. Hold there and I see a reject toward 156. Break higher and 159, 160 are next.

read the full article here.

— Alan

EURUSD Daily Chart

I'm liking this chart more and more now. Here's what I'm watching:

Euro side: relatively weak economy compared to U.S., and potentially worsening due to oil supply shocks.
Saudis told Europe oil refiners they’ll get no crude next month.

Match that with a Fed that was surprisingly hawkish and you have a clean setup. Also, US yields are recouping their gains with no signs of slowing down. This could cause DXY to break out of 100.5 and make a leg higher, thus bringing EUR/USD down.

EdgeFinder score is also very bearish on EUR/USD.

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🚨 According to a Japanese source: Japan conducted a rate check earlier today as USD/JPY climbs near 160.

The Bank of Japan is Hiking Rates
https://youtu.be/qJfZ_L4z38E

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Crude Oil Now Falls a 4th Day on Diplomacy & Supply

Oil continues its retreat today, a fourth down session, on new Middle East developments and a production ramp from Saudi Arabia. WTI is in the mid-90s.

The developments are nothing new. We see these often, and they tend to disappoint later. Trump floated meeting Iran's president at the UN and said the war will end soon, but Iran says it will only talk if the fighting and blockade end. Houthi attacks on Riyadh this weekend did not even move price.

Still, the follow-through today is strong, and it is physical. Hormuz flows hit a six-month high, averaging 17.1 million bpd. Saudi Aramco is loading 14 million barrels on seven VLCCs, ramping exports through the strait even with the East-West pipeline still down.

Unless the Iran war actually ends, I generally believe US oil stays bid above $80. The 200-day sits right there.

read the full article here.

— Alan

Bitcoin Daily Chart

Bitcoin is waking up today! Up 5.50% today. Seems like bulls stepped in at the 38.2% fib retracement level and are breaking above that 83k level of resistance.

A retest looks quite interesting 👀

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Gold 4H:

Showing some promising price action here - holding support + breaking out of the downward channel.

A failure below the fed day low would turn my technical bias decidedly bearish, but for now bulls seem to be trying to build up momentum higher.

- Nick

DXY Now Clears 100.5 as More Hikes Come Into View

The dollar index is breaking out this afternoon clearing the 100.5 resistance, the recent July high. And the breakout seems to have some follow-through.

The reason is the Fed positioned the market for more hikes. Personally I do not fully believe it, but you have to respect yields and history. History says a one-and-done hike rarely happens. A first hike after a prolonged hold or cut is usually followed by two or three more. Warsh's dot plot showed exactly that. The main exception was Greenspan's March 1997 "tap on the brakes", and even that got cut short by the Asian financial crisis.

So is one-and-done possible? Yes. But watch Fed speakers and yields. The short end is still elevated, EdgeFinder reads +4 bullish, and FedWatch still prices two to three hikes.

One note: oil is down five straight days, which helps the doves. Though it's crucial to take a holistic view and not cherry-pick.

read the full article here.

— Alan