Fed Minutes on Tap as Stocks Rotate Lower

Relief rally or more pain to come?

Technical Edge — 

• NYSE Breadth: 15% Upside Volume (!)

• Advance/Decline: 12% Advance (!)

• VIX: ~$23

I was thinking yesterday: “I hate fighting the larger trend.” 

I really do. I don’t like to fight the Fed and I don’t like to fight the trend. So far this year, the predominant trend has been to buy the dips and buy the upside rotations — particularly in tech. 

But I’m finding it harder and harder to be a bull right now. 

Maybe that’s overly cautious and perhaps it’s flat out wrong. However, the 10-year yield is at a multi-month high, while the dollar continues higher. For what it’s worth, the 10-year was at 4.33% when the S&P was at the 2022 low. Now? It’s just under 4%, up from 3.33% a few weeks ago. (Ticker for this is “TNX,” for anyone wondering).

The CPI, PPI and Jobs report all came in higher-than-expected. Three months ago that would have buried equities. Now investors are shrugging it off. 

Bonds are tumbling on the prospects of “higher for longer,” as rate-bets continue to call for more increases. That makes it hard to be a confident buyer. Or at least, makes it hard for me to be. 

Individual stock trades to come in a separate email, pre-market today. 

S&P 500 — ES 

The charts tell the story. We had rejection from the 4175 area, then went weekly down below 4056 early on Tuesday — the first session of the week. Overnight, the ES found stability at the 50-day moving average and 50% retracement and reclaimed yesterday’s low on the bounce. 

The trade: The tag of major support and reclaim of yesterday’s low is our bread-and-butter setup. I don’t know if we’ll see it again in the regular session — like a quick dump down to the Globex lows & bounce — but if we do, consider buying the same setup (with the trigger being the reclaim of the prior low, 4002). 

If we do get an upside stop-run, keep 4037 to 4045 in mind — that’s the 50% to 61.8% retracement zone of yesterday’s range. Above that and last week’s low of 4056 could be a key pivot. 

A lot of potential for a stop-run and full range retracements today with the Fed on tap. 

If support blows out near 4000, do not rule out 3950 — which is the 200-day sma and 61.8% retracement combo.

SPY