[Analysis] Pre FOMC , calm before the storm?

19 thg 9, 2022

S&P has broken down 3900 last week as mentioned.

Previous analysis.

75 bps is pretty much priced in. The more important question is will FOMC raised its total FFR projection? The current FFR projection for 2022 is 3.4%.
If 75bps is raised for September, FOMC only needs to raise another 25bps to hit the 2022 target.

BUT..a VERY BIG BUT here.. IF FOMC raises their FFR target to 4.0% or even 4.5%, then we will see more hikes coming up.
Don't just focus on "50bps vs 75 bps vs 100bps". The total projection target also matters.

In March 2022, FOMC projected ONLY 1.9% FFR for 2022 (delusion freaks). The Market did a delusional rally also based on FOMC's delusional projection.
Everything came crashing down when FOMC realized 1.9% FFR is not going to curb inflation and raised the total FFR projection to 3.4%.

So... is 3.4% enough? We don't think so. It will have to be somewhere around 4.0 to 4.5% by the end of 2023.

For the entirety of 2022, we have correctly called every rally to be a delusional rally, and so far, we were right.

Going forward, there MAY be room for a SMALL rebound above 3900, but that rebound will not last. The hard resistance is at 4100 to 4200 which will be very hard to break.

FedEx has also shown that the majority of the CEOs have gone delusional and projected aggressive earnings for the coming earnings seasons. The price for these companies has dived 20% because the CEO realized, they cannot meet those aggressive projections they have promised. This will be the trend for many other companies in the upcoming earning season.


Our Verdict:
There will be NO all-time high this year. Good luck getting S&P to rally 1000 points in 3 months.
It is highly likely June's bottom to be retested or even broken.

But remember, prices do not move one direction down. Beware of the bear market rally in between.