The market once again failed to produce a decent oversold bounce. There was some strength early on, but it has disappeared as interest rates will continue to rise and the endless parade of Federal Reserve members in recent days has not brought on the market new information to digest.
The S&P 500 is now down for six straight days and nine of the past 11 sessions. It’s understandable that traders are looking for some relief from this ongoing pressure, but that so many people feel that the markets’ continued pain is inevitable, makes it much more difficult. As soon as there is some strength, the short traders jump in and the shorts recover some positions. There is no fear of a bust because there is no decent sustained momentum.
The main headwind is interest rates. The 20+ Year Treasury Bond Fund ( TLT ) saw its losses accelerate to 2.7%. There is no indication that rates will slow anytime soon and the market is struggling to understand what the economic implications are as we see levels not seen in decades.
The market should take some kind of counter-trend move soon and traders will remain focused on trying to catch it, but in the bigger scheme of things there isn’t much to do right now but wait for the bear market to continue develops and eventually to trace the moment of a more significant turn.
Technically the S&P futures price (ES1) is right at the support from the June bottom, in addition we are nearing the bottom of the descending channel and the Sequential has printed a 9 and is nearing the end of its count to 13. This is an indication of overheated movement and a short bounce from these levels to the 3904 area is possible before the price continues to search for new lows. The DeMarker Oscillator is already in the Oversold zone, so from here we watch for a cooling move out of the zone. However, there is no sign of a slowdown from the price action, which does not represent good sentiment to support the recovery. A drop to 3543 is possible to rob the stops of those who entered the support before the recovery begins.
Neil Kashkari, president of the Federal Reserve Bank of Minneapolis, reaffirmed the central bank’s determination to reduce persistent and high inflation. “There is a lot of tightening ahead,” Mr. Kashkari said, adding that the Fed was “committed to restoring price stability” but also acknowledged that “there is a risk of overdoing it.” Nothing new to move the markets other than current action.
The focus this week remains on US and UK GDP data, as well as European CPI. By the end of the week, there are a few more statements from Fed members who probably won’t say anything different than what Powell has already said.
On the economic front, data on Tuesday showed that companies cut orders for durable goods for the second month in a row. Home prices continued to post large year-over-year gains, but the pace of that growth slowed. House prices are falling month after month.
However, consumers are becoming increasingly optimistic about the US economy. The Conference Board’s consumer confidence index rose in September for the second month in a row, lifted in part by falling gasoline prices.
Dealer Anatoliy Pavlov