Equity
Stocks Brace for the FOMCThe small rally we saw in stocks yesterday was quickly batted down. We managed to make a run for 3909, which was our target and lower bound of some congestion from earlier this month. However, we promptly rejected that level, as anticipated, and immediately sought support again at lows just above 3825. The markets, usually quiet before an FOMC, reacted out of one last burst of fear for the impending meeting today at 2PM EST. It is expected that we will get yet another 75 bps rate hike, with some saying it could be as high as 100 bps. After this, it is likely that we see a relief rally that could test the 3900's again, with 4009 being the ultimate target for a rally. If we sell off again then we should have support at the base of the 3800's.
Stocks Pivot, Await FOMCStocks caught a nice pivot from lows just above our level at 3827. We saw some volume come through and were able to break past a relative low at 3887. Currently a bit of a retracement is taking us below that level again. We won't expect much action from the markets before the FOMC, so current levels are likely to hold. Watch for support at 3827 again, and resistance somewhere around 3909 or 3928 if we can make it that far.
Stocks Brace for Fed Rate HikeStocks are edging lower yet again, as investors price in a potentially historic rate hike. In order to combat the highest inflation we have seen in 40 years, most agree that we are looking at a 75 bps rate hike , but some suggest it could be as high as 100 bps . However, multiple indicators suggest we are in the thicket of a recession, and after this rate hike, they are likely to pivot to a more dovish stance, with maybe one more rate hike in the tank before they're forced to start cutting again. The S&P has edged lower and dow futures have plunged more than 200 points as the market brace for the tightening. The S&P is testing 3848, and the Kovach OBV is still bearish. We do appear to be seeing some support here confirmed by green triangles on the KRI. If we can pivot, 3909 will be the next target, but we don't anticipate to break that any time soon. If we fall further, we should expect support at the base of the 3800's.
What to Expect with Stocks?Stocks got slammed yesterday after retail sales suggested several areas of the economy are being hurt by inflation. The Fed is still expected to hike rates, and some fear that this will tip us deeper into a recession. Stocks closed lower, extending the worst selloff in over two years. We broke support here at 3887, and appear to be testing 3867, but a green triangle on the KRI appears to be suggesting we are finding support here. The Kovach OBV has taken a sharp dive, and does not appear to be showing many signs of picking up. If we are able to pivot, we will have several levels to break through in the 3900's before we can consider the 4K's again.
Looking back at Equity Factors in Q2 with WisdomTreeMarkets in Q2 2022 continued to suffer from entrenched inflation and aggressive rate hikes from central banks. They also reacted to the slowdown of the global economy and the increased risk of a recession in developed economies. These changing market conditions impacted equity factors differently.
In this instalment of the WisdomTree Quarterly Equity Factor Review1, we aim to shed some light on how equity factors behaved in Q2 2022 and how this may have impacted investors’ portfolios.
-High dividend continued to dominate, followed by a revival of min volatility
-Value started to show signs of slowing down due to its cyclical nature
-Momentum and size continued to suffer
-Quality strategies continued to deliver mixed results depending on their portfolio’s overall valuation
Over July, central banks aggressive tightening continue to slow down the global economy, raising the probability of a global recession.The impact of this slowdown has been clear with rate hike expectations lowering leading to a factor rotation in favor of quality and size.
Looking forward, uncertainty around recession and economic growth will continue to rise. Investors are facing the need to balance their portfolio between building wealth over the long term and protecting their portfolio during economic downturns. This environment could therefore favour high dividend and quality stocks.
Performance in focus: high dividend continues to lead, but min vol is catching up
In the second quarter of 2022, equity markets suffered from a deep drawdown, leading to the worst first half year in decades. The MSCI World lost -16.2%. Unusually, the US underperformed European markets with -16.9% versus -9%. Emerging markets suffered as well with -11.4%.
Q2 2022 factor performance continued to be driven by inflation surprises on the upside and the hawkish stand of developed countries' central banks. However we also saw two new entrants this quarter with heightened volatility and the fear of recession rocking markets further. Faced with such a brutal landscape, some factors continued to do well, and some did not:
-High dividend dominated in most regions. This factor finished first in all developed geographies
-Pushed by increasing volatility and heightened fears of recession, min volatility followed closely: second in developed markets and first in emerging markets (EMs)
-Value is the last factor that managed to outperform consistently this quarter thanks to rate hikes and despite the volatility increase
-Momentum, size and growth suffered the most over the quarter, delivering underperformance across regions
-Quality sat between those two groups, delivering mild underperformance in European and global equities but outperforming in US equities. However, like in Q1, the definition of quality and the criteria used would have hugely impacted the result. Quality, left unattended, tends to tilt toward growth (investors pay for quality, after all) and would have suffered from that tilt. For example, highly profitable companies and dividend growers have fared better over the period using their value/high dividend tilt to outperform.
Looking at the outperformance of factors over the last six months, we notice that:
-After a very strong start, value showed signs of slowing down in Q2. Value is a mostly cyclical factor, and an inflationary environment with aggressive rate hikes is very supportive. Fear of recession and increased volatility are not
-High dividend is the overall winner for the 2022 first half and went from strength to strength
-Min volatility started a bit slower in Q1 but has picked up speed in Q2 on the back of recession fears
-Size and momentum suffered across the full six months in an environment that was not supportive of cyclical stocks
-Finally, quality suffered the most in the first six weeks of the year and has hovered around the same level since then. With the market turning more defensive toward the end of Q2, quality is showing signs of life. Here again, highly profitable companies and dividend growers, for example, have fared better.
It is worth noting that since the end of June, markets expectation of a recession has continued to grow. This has led to a revision downward of the expectation on future rate hikes. Equity factors have reacted to this change pretty strongly, with quality and size taking the lead for that month while value and high dividend released some of their performance. This rotation has been particularly strong in Europe where economic predictions are the most dire. Having said that, the performance difference in the first 6 months were so high that the full year to date picture remains similar.
Valuations continue to come down across the board
In Q2 2022, valuations continued to decrease across the board for factors. Momentum and quality saw the largest drop in valuations in all geographies. On a relative basis, high dividend stocks and value stocks got more expensive versus the market on the basis of lower drop in their price to earning ratios.
The re-opening trade in 2021 has evolved into the ‘recession trade’ in 2022, owing to a tardy start to the hiking cycle by central banks. Their aggressive tightening plan is slowing the global economy, raising the probability of a global recession. Leading economic data (LEI) shows economic momentum is fading quickly. The impact of this slowdown has been clear in July with rate hike expectations lowering leading to a factor rotation in favor of quality and size. However, this risk of recession only adds to the uncertainty for investors. They need to carefully balance the risk in their equity allocation. All-weather assets continue to be best positioned, delivering balance between building wealth over the long term whilst protecting the portfolio during economic downturns. This environment could therefore favour high dividend and quality stocks.
World is proxied by MSCI World net TR Index. US is proxied by MSCI USA net TR Index. Europe is proxied by MSCI Europe net TR Index. Emerging Markets is proxied by MSCI Emerging Markets net TR Index. Minimum volatility is proxied by the relevant MSCI Min Volatility net total return index. Quality is proxied by the relevant MSCI Quality net total return index.
Momentum is proxied by the relevant MSCI Momentum net total return index. High dividend is proxied by the relevant MSCI High Dividend net total return index. Size is proxied by the relevant MSCI Small Cap net total return index. Value is proxied by the relevant MSCI Enhanced Value net total return index.
Sources
1 Definitions of each factor are available below
This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.
What Yesterday's CPI Means for the Fed and StocksA hotter than expected CPI print tanked stocks yesterday, wiping out this week's rally and then some. The markets were hoping that CPI, which is the Fed's favorite inflation gauge, would show that inflation is plateauing and that their policies are working. Under these assumptions it would be reasonable to think that after September's rate hike, they would take a more dovish position. However with red hot inflation beating expectations, this is clearly not the case, and some think the Fed will double down on their stance, hiking rates to 100 bps when 50 bps was more likely just a few days prior. The S&P 500 responded accordingly, smashing through the 4000's, and reestablishing the 3000's, finally finding support at our level at 3928. It is likely the markets will equilibrate as we digest CPI, so expect the S&P to remain bounded by 3909 and 4009 for now. We will need to wait for more data to come out this week (retail sales on Thursday and University of Michigan sentiment on Friday) to get a clearer picture of the state of the economy, and how the markets will react further.
Stocks Edge Higher Ahead of CPI DataStocks have edged higher, breaking through to our next target of 4122, exactly as we predicted yesterday. Stocks are up ahead of key US inflation data, expected to come in at 8.0% , which is still high, but hopefully at least plateauing. It looks like we are meeting some resistance as confirmed by red triangles accumulating on the KRI. The Kovach OBV is still strong but may be rounding off slightly. While we may be in for a retracement, if momentum can sustain, then 4144 or 4178 are reasonable targets. If we reject current levels watch 4068 for support.
The S&P 500 Regains the 4K'sStocks have broken out, climbing significantly and reestablishing the 4K's. We have broken through 4009, and just broke out past the next level at 4068. We have already crossed one vacuum zone, and appear to be breaking out into another. If momentum continues today, then 4122 is the next target. The Kovach OBV has picked up sharply, suggesting there might be some serious legs to this rally. If not, 4009 should provide support again.
MARKET UPDATE!!!! MARKETS LOOK AHEAD OT CPI REPORT! Hi Snipers,
Please refer to the recording for the next price levels and scenarios.
Thanks
MS
Stocks Snap Losing StreakStocks snapped a losing streak yesterday as they gained strength off of Powells comments. The Fed is still expected to hike rates in September, with a 75 bps hike increasingly more likely. However, if and when inflation eases, we should see a more dovish stance. The S&P 500 broke through our target and upper bound at 4009, but is wavering in the vacuum zone between this level and 4068. If we reject current levels we could test the base of the 4000 handle or deeper into the 3900's. If we rally further, 4068 remains a target. www.cnbc.com
Can the S&P 500 Regain 4000?After establishing new lows, stocks pivoted back to 3978, just one level below 4009, our target from yesterday. We are seeing red triangles on the KRI, indicating some resistance but if we can break through, 4009 is the next level to break before we can consider higher levels. If we reject this level, we could easily retrace the entire move, and head back to support at 3909 or 3887.
Stocks Edge LowerStocks broke through relative lows at 3909 as anticipated. We gave up the 3900 handle entirely, and broke down into the 3800's, but found immediate support at 3887. We are testing 3909 from below at the time of this writing but the S&P 500 looks pretty weak. The Kovach OBV is on a steady downward decline, and we keep breaking levels from below. We should have strong support at 3848, a relative high/low from June. If we are able to pivot or we see a relief rally, then 3963 is a reasonable target.
SPX Daily TA Cautiously BearishSPX Daily cautiously bearish. Recommended ratio: 15% SPX, 85% Cash.
* BOUNCE WATCH . Equities and Cryptos continue to sell off in favor of DXY and US Treasuries as Russia halts the Nordstream natural gas pipeline indefinitely (renewing fears of a brutal European winter energy crisis). Key Upcoming Dates: 10th GDPNow US Q3 GDP Estimate at 830am EST 09/07 ; 6th Beige Book at 2pm EST 09/07 ; August CPI at 830am EST 09/13; The Merge (Ethereum) at 8am EST 09/14; FOMC meeting 09/20-09/21 (Statement Released at 2pm EST on 09/21).*
Price is currently trending down at ~$3908 as it risks losing $3938 minor support; the next support is the lower trendline of the descending channel from August 2021 at ~$3875. Volume is currently Moderate (high) and is on track to favor sellers for a second consecutive session if it closes today in the red; if this happens then sellers will have dominated six of the last seven sessions. Parabolic SAR flips bullish at $4065, this margin is mildly bullish at the moment. RSI is currently trending sideways at 35 after being rejected by the uptrend line from 01/27/22 as resistance at 38 resistance, the next support is the uptrend line from August 2015 at ~31. Stochastic remains neutral and continues to trend sideways at max bottom for what is now seven consecutive sessions. MACD remains bearish and is currently trending down at -36 with no signs of trough formation, the next support is at -44. ADX continues to trend sideways at 24 for a twelfth consecutive session as Price continues to see selling pressure, this is neutral at the moment.
If Price is able to bounce here then it will have to turn $3938 minor resistance back to support before it can continue higher to retest the 50 MA as resistance at $4k psychological resistance . However, if Price continues to break down here, it will likely retest the lower trendline of the descending channel from August 2021 at ~$3875 as support . Mental Stop Loss: (two consecutive closes above) $3938.
Another Lackluster Week for Stocks?Stocks opened the APAC session weak (as expected). The markets appear to still be pricing in the recession and the results of the FOMC September 21. We aren't likely to get much of a break in stocks until after this rate hike, which some conjecture might be the last . The S&P 500 saw support from 3909, which was an auspicious level corresponding to a July low. The Kovach OBV, however, is still very bearish, suggesting that it will be an uphill battle for the stock market to claw back highs. If we get a relief rally, then we could test 4009. If we press lower, then 3848 is a reasonable target.
How will Today's Nonfarm Payrolls Release Effect Stocks?The S&P 500 caught a small rally yesterday, but it could be short-lived. After such a strong selloff, we were due for a relief rally at some point. It appears the markets are still pricing in what the Fed will do this month at their FOMC meeting, but a 50-75 bps is the most likely. We tested the exact level we predicted at 3909. Subsequently, we bounced back to the upper 3900's, where we started running into resistance. In particular, 3978 is proving difficult to crack, but if we are able to, then 4009 will be the next major hurdle and first level in the 4000's. If things turn south, expect support at 3909 again, then the next major level is a low at 3825, but we are likely to find some support in between for the time being.
Headline figures from Nonfarm Payroll data for August suggest some weakness with a headline miss and two month downward revision. This may dampen the Fed's hawkish tone slightly, but we are still likely to see the rate hike we mentioned above. Stocks are likely to continue in a slump until September's FOMC.
✅. First short setup turned GOOD - Next move looks bullishMarket seems oversold after the rejection of the 200MA. It looks like we are in time for a few rally days!
Bear market rallies are the strongest. Volatility whips both ways!
Historical Precedent
I wanted to share the 1990 precedent that I mentioned first during early May. I would like to point to the idea that we are quite short-term oversold (by looking at the speed and distance that we came down), so if you are short might be good idea to tighten stops, since we are likely to have a couple of rally days. Also to be clear, my personal guess (which not a tradable advice but just a gut feeling) is that we will not get the Easy Dollar Environment (EDE) so quickly like in 1990 but more like until end of the year. In the meantime I guess we would chop before a clear EDE in Oct-Jan.
Recession Keeps Hammering StocksIncreasingly more market participants seem to be realizing that we are, in fact, in a recession, despite what our overlords are proffering in the propaganda outlets. The S&P 500 has careened into lower levels, finally finding support just one level above that which we predicted yesterday at 3909. Indeed, 3928 seems to be holding, with green triangles on the KRI confirming support. The Kovach OBV is abysmally bearish, but may be starting to show some meager signs of leveling off. After 3909, the next major target is 3825, another relative low. If we are able to catch a relief rally then 4009 is the next target.
China A50 Index - STRONG BUYHi Guys,
2823.hk which is the A shares ETF of China listed in Hong Kong is currently at a major support which it has been holding since 2016.
Also, it tested its 0.8 fib, broke previous high and now retraced back to 0.8 of the smaller wave. Classic PA.
I am bullish on China A Shares and believe that price target should be north of $18.
Buy at 14.84.
SPX Daily TA Cautiously BearishSPXUSD Daily cautiously bearish. Recommended ratio: 15% SPX, 85% Cash.
*BOUNCE WATCH. Equities continued to take a plunge today as Cleveland Fed President Loretta Mester mentioned that she would like to see rates above 4% by year end and for most (if not all) of 2023. In one of my previous analyses I incorrectly mentioned that only three Fed members voted on Federal Funds Rate (FFR), it is in fact 12 Fed members (the 7 governors, the New York Regional Fed President and then 4 alternating Reserve Bank Presidents) which comprise the FOMC and vote on FFR. Loretta Mester is one of them. Markets are eagerly waiting to see the August Unemployment Rate in Friday's Jobs Report, if it comes in flat or lower, 75bps will likely become the preferred option come 09/21. However, if there is an uptick in Unemployment a 50bps rate-hike on 09/21 would still likely be on the table. Additional guidance will be provided by August's CPI on 09/13. Key Upcoming Dates: 9th GDPNow US GDP estimate at 10am EST 09/01 ; August Employment Situation 830am EST 09/02; August CPI at 830am EST 09/13.*
Price is currently trending down at $3954 (after breaking below the 50 MA at $4k psychological support) and is technically retesting $3938 minor support. Volume is High and has favored sellers for four consecutive sessions, this is mildly bullish because of the . Parabolic SAR flips bullish at $4190, this margin is mildly bullish at the moment. RSI is currently trending down at 37 and is technically testing the uptrend line from 01/27/22 at 38 support. Stochastic remains bearish and is currently testing max bottom. MACD remains bearish and is currently trending down at -5 with no signs of trough formation as it quickly approaches a test of -11.45 support (which would likely coincide with the uptrend line from March 2020). ADX remains trending sideways at 23 as Price continues to fall, this is neutral at the moment.
If Price is able to bounce off of $3938 minor support then it will likely retest the 50 MA as resistance at ~$4k psychological resistance . However, if Price breaks down below $3938 minor support , it will likely retest the lower trendline of the descending channel from August 2021 at ~$3880 as support . Mental Stop Loss: (two consecutive closes above) $4k.
Recession Weighs on StocksThe S&P 500 has slipped further after making a run for higher levels. Yesterday, we tested two levels that we have been identifying as targets for weeks now: first we touched 4009, then made a brief pivot to 4068, where we saw immediate resistance, confirmed by red triangles on the KRI. We subsequently plummeted as the risk off tone permeated the markets. We gave up the 4000 handle entirely, testing as low as 3963, where we saw green triangles on the KRI confirming support. The Kovach OBV has turned bearish, but we could see support from a relative low at 3909. If we pivot, we must first break through 4009 again then 4068 is the next target.
Stocks Bottom Out... For Now...After plummetting to the bottom of the 4000 handle, stocks made a meager attempt at a rally. Our level at 4009 was the exact low of the S&P 500. It touched this level and promptly pivoted, testing the next level at 4068. However red triangles on the KRI immediately confirmed resistance and have been struggling to break through. If we can, then 4122 is the next target. It seems that 4009 provided good support but in the event of another selloff, 3978 and 3963 are the next targets.
EUR/USD SHORT OPPORTUNITY 0.96 INCOMINGI hate explaining myself on this bs description box but anyways ive made the word count so i dont need to explain anything now lolll. Self Explanatory Charts!
i value my time so if anyone is willing to put in the effort to learn a few things about the markets then im here to help at no costs! hit me up
