MARKETS UPDATE and COMMENT ON POWELL'S SPEECH (2:15 pm EDST)
A highly anticipated speech by Federal Reserve Chairman Jerome Powell today sent a heavy wave of disappointment across Wall Street. Many investors had hoped he would soften his hawkish stance on fighting inflation and moderate his interest rate increases later this year. Instead, Mr. Powell dug in his heels and declared there would be more interest rate hikes which would likely cause pain for Americans in the form of a weaker economy and job losses. Whoa! That's not what investors wanted to hear. Not surprisingly, the broad stock market tumbled on this news, with the DOW losing over 700 points at the time of this writing (2:15 pm EDST). Of course, as always, we will have to wait to see how long the effect of Mr. Powell's words will last. Wall Street has a tendency to be short-sighted and will sometimes shrug off bad news rather quickly.
Today's drop tells us that our sub-cycle correction in equities isn't over yet. I wrote in Tuesday's blog:
"Good general target ranges for this correction would be 32,000 - 33,000 in the DOW, 4,000 - 4,200 in the S&P 500, and 12,400 - 12,700 in the NASDAQ. We are now inside those ranges, so we should be looking to buy soon. It is early in our reversal zone (the mid-point is Friday and it ends next week on Wednesday), so there is plenty of time for these indices to push lower."
We are nearing the end of this reversal zone, so that sub-cycle bottom may be imminent. If these indices stabilize now or early next week, we will probably be looking to go long. If this market continues to fall past next Wednesday, however, it could mean the market is turning bearish, and we would refrain from buying. We remain on the sidelines of the broad stock market for now.
Gold and silver prices also tumbled today suggesting their sub-cycle corrections could go lower. If gold or silver makes a new low next week without the other, that could be a good buy spot for both metals. We took a small profit on our gold long position this week, so we are on the sidelines of both metals for now.
Crude oil prices dropped today, but they will have to drop a lot more to challenge last week's low at $85.37. If they can't do this by next week, we will assume the new medium-term cycle started last week and will start looking for a good spot to buy as crude could rally significantly. We are currently on the sidelines of crude.
A highly anticipated speech by Federal Reserve Chairman Jerome Powell today sent a heavy wave of disappointment across Wall Street. Many investors had hoped he would soften his hawkish stance on fighting inflation and moderate his interest rate increases later this year. Instead, Mr. Powell dug in his heels and declared there would be more interest rate hikes which would likely cause pain for Americans in the form of a weaker economy and job losses. Whoa! That's not what investors wanted to hear. Not surprisingly, the broad stock market tumbled on this news, with the DOW losing over 700 points at the time of this writing (2:15 pm EDST). Of course, as always, we will have to wait to see how long the effect of Mr. Powell's words will last. Wall Street has a tendency to be short-sighted and will sometimes shrug off bad news rather quickly.
Today's drop tells us that our sub-cycle correction in equities isn't over yet. I wrote in Tuesday's blog:
"Good general target ranges for this correction would be 32,000 - 33,000 in the DOW, 4,000 - 4,200 in the S&P 500, and 12,400 - 12,700 in the NASDAQ. We are now inside those ranges, so we should be looking to buy soon. It is early in our reversal zone (the mid-point is Friday and it ends next week on Wednesday), so there is plenty of time for these indices to push lower."
We are nearing the end of this reversal zone, so that sub-cycle bottom may be imminent. If these indices stabilize now or early next week, we will probably be looking to go long. If this market continues to fall past next Wednesday, however, it could mean the market is turning bearish, and we would refrain from buying. We remain on the sidelines of the broad stock market for now.
Gold and silver prices also tumbled today suggesting their sub-cycle corrections could go lower. If gold or silver makes a new low next week without the other, that could be a good buy spot for both metals. We took a small profit on our gold long position this week, so we are on the sidelines of both metals for now.
Crude oil prices dropped today, but they will have to drop a lot more to challenge last week's low at $85.37. If they can't do this by next week, we will assume the new medium-term cycle started last week and will start looking for a good spot to buy as crude could rally significantly. We are currently on the sidelines of crude.
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