COMMENT ON THE FED MEETING and BRIEF MARKETS UPDATE (9:00 pm EDST)
Immediately after the Fed announced another large rate hike at 2 PM this afternoon, the broad stock market rallied. The large rate hike was expected and did not discourage investors, but Jerome Powell's speech at 2:30 was a different story. Although Powell hinted that the Fed may slow down the pace of rate hikes at some point in the future, he emphasized that we have a long way to go before interest rates are sufficiently high enough to curb inflation. How high will they need to go? Powell stated that "we may move to higher levels than we thought." That hawkish rhetoric was enough to throw a wet blanket on the brief rally. Equity markets plummeted following Powell's speech and closed the day with a heavy loss. The DOW was down 504 points, the S&P 500 lost 96 points, and the NASDAQ closed 366 points lower.
Could this be a major turning point in the market? Yes, it could. But we know that investors sometimes shrug off the Fed's comments within days, and it is very early in our new reversal zone (Nov. 2 - 10), so there is plenty of time for this market to push a little higher before turning down. If it does that into early next week, we may see a good spot to sell short. On the other hand, if Powell's comments trigger a major sell-off over the next several days, we might be looking to buy a bottom. We will remain on the sidelines for now and wait to see how the market moves into next week's "pivot point" at November 7.
Gold and silver prices lost a little ground today, which is not surprising considering a hawkish Fed usually favors the U.S. dollar (the U.S. Dollar Index is currently up on the overnight market following today's trading). If the dollar rallies tomorrow, the metals may push lower. We are on the sidelines of both gold and silver.
Crude oil prices pushed higher today (likely due to low supplies as well as the ongoing Russia/Ukraine conflict) and exceeded last week's high of $89.79 (Dec. contract chart). They are still well below the October high of $92.34, however, so we can't get bullish on this commodity just yet. We remain on the sidelines of crude.
Immediately after the Fed announced another large rate hike at 2 PM this afternoon, the broad stock market rallied. The large rate hike was expected and did not discourage investors, but Jerome Powell's speech at 2:30 was a different story. Although Powell hinted that the Fed may slow down the pace of rate hikes at some point in the future, he emphasized that we have a long way to go before interest rates are sufficiently high enough to curb inflation. How high will they need to go? Powell stated that "we may move to higher levels than we thought." That hawkish rhetoric was enough to throw a wet blanket on the brief rally. Equity markets plummeted following Powell's speech and closed the day with a heavy loss. The DOW was down 504 points, the S&P 500 lost 96 points, and the NASDAQ closed 366 points lower.
Could this be a major turning point in the market? Yes, it could. But we know that investors sometimes shrug off the Fed's comments within days, and it is very early in our new reversal zone (Nov. 2 - 10), so there is plenty of time for this market to push a little higher before turning down. If it does that into early next week, we may see a good spot to sell short. On the other hand, if Powell's comments trigger a major sell-off over the next several days, we might be looking to buy a bottom. We will remain on the sidelines for now and wait to see how the market moves into next week's "pivot point" at November 7.
Gold and silver prices lost a little ground today, which is not surprising considering a hawkish Fed usually favors the U.S. dollar (the U.S. Dollar Index is currently up on the overnight market following today's trading). If the dollar rallies tomorrow, the metals may push lower. We are on the sidelines of both gold and silver.
Crude oil prices pushed higher today (likely due to low supplies as well as the ongoing Russia/Ukraine conflict) and exceeded last week's high of $89.79 (Dec. contract chart). They are still well below the October high of $92.34, however, so we can't get bullish on this commodity just yet. We remain on the sidelines of crude.
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