Wednesday, March 21 is the pivot for the week as either Powell is perceived as hawkish and odds for a 4th rate hike in 2018 to grow beyond the 25% they sit at or Mr. Market sees enough. Dovishness to keep-the-faith even for a week or two, writes Ziad Jasani Monday.
View his video commentary here
We ended last week with U.S. markets holding above support at its 50-day average S&P 500 (SPX) 2,749, and S&P 500/Toronto (TSX) in a range below its 50-day average (15,776) but above its 200-day average (15,610).
Inflationary pressures did not break the market last week.
However, White House woes, UK/Russia, trade wars (U.S.-China), bitcoin-battery on ad-pull-backs and GDP forecasters lowering calls (Atlanta Fed Q1 2018 = +1.8%) prevented markets from carrying the Feb. 9 bounce forward.
Should we stay, or should we go? This week is likely to pivot on Wednesday, March 2 at 2 pm (EDT) when we hear from the Fed and new Chair Powell.
We ended last week with the Hold decision in U.S. markets for those playing out the Feb. 9/March 2 macro-market swing-low and accumulated some short-term TSX-Risk (XFN-T, ZEB-T, XEG-T, ZEO-T) Friday morning (March 16).
Macro-Variable analysis on March 16 implied the following behaviors over Monday/Tuesday (March 19 & 20):
• U.S. dollar (USD) ↓ (Euro, Yen & CAD ↑)
• U.S. Treasury yields ↔↓ & Bonds ↔↑
• Commodities ↑ (Oil, Nat gas, Copper, Precious Metals)
• Equities ↑ (Commodity-laden markets & Defensive Sectors outperform)
• Our Trading Community voted on Scenario B for the week (see chart above).
Wednesday, March 21 is the pivot for the week as either Powell is perceived as hawkish and odds for a 4th rate hike in 2018 to grow beyond the 25% they sit at or Mr. Market sees enough.
Dovishness to keep-the-faith even for a week or two and allow for a retest of late Jan. 2018 highs.
The charts are set up to expect Dovishness. Why? Bonds have broken down-trends, the yield curve compressed over the last week, and tields are highly overbought while bonds are oversold: 10-year U.S. Treasury yield, Global Bond Market, AGG, XBB-T.
However, logic would dictate that the Fed leans hawkish, as inflationary pressures are mounting and there are less doves on the voting roster this go around.
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