Shallow Dips

Equities Continue to Shine

Preface

As discussed in the last issue, this week’s FOMC minutes release was a non-event and we learned nothing new other than some participants had favoured a June hike instead of July. The rest was a reiteration of previously disclosed hawkish sentiments around higher rates for longer with a moderation in the pace of said hikes.

ADP Employment Change was a higher-impact release, with a shocking +497k new jobs vs. +228k expected. This fuelled a heavy stock market selloff at the Wednesday morning open. Throughout the day, stock indexes recovered somewhat, but still closed down about -0.75%.

Persistent growth in employment numbers adds to inflationary pressures and the likelihood of additional Fed interest rate hikes. Labour market reports are absolutely moving the market right now and creating all kinds of tasty volatility for intraday trades. Prepare for another round during this morning’s NonFarm Payrolls report.

News Headlines

  • $650 billion asset manager Bernstein says SEC is likely to approve a spot Bitcoin ETF
  • $9 trillion asset manager BlackRock names Coinbase as SSA counterpart in updated Spot Bitcoin ETF filing
  • Federal judge blocks Biden admin from contacting social media companies to censor information
  • Biden administration’s collusion with social media networks likely violated First Amendment rights
  • Crypto asset manager Valkyrie files for Spot Bitcoin ETF and follows the lead of BlackRock and Fidelity in naming Coinbase as SSA counterpart
  • BlackRock CEO Larry Fink declares crypto digital gold and Bitcoin an “international asset”

Now let’s take a look at the week ahead.

Economic Calendar

Highlights

  • Consumer Price Index – Wednesday
  • Producer Price Index – Thursday
  • Michigan Consumer Sentiment – Friday
https://www.fxstreet.com/economic-calendar

Data Preview & Commentary

Trading conditions may be looser to start the week as there’s a lack of key economic data until Wednesday. CPI is the main event this time, and forecasts are mixed.

While headline CPI has steadily downtrended, Core CPI has been more stubborn. The Fed will laser in on service inflation inside this report. While content that goods prices have eased from their peak and that housing costs are likely to fall in the near future, services costs are an outstanding concern.

Services prices are mainly linked to wages, and wage increases have seen a recent uptick. The Atlanta Fed’s Wage Tracker has wages rising at a 6% annual rate in their latest estimate. That’s up from just 4.5% at the end of 2021 and too high to give the Fed an ‘all clear’ sign. Without strong evidence that services prices are no longer increasing rapidly, the Fed is unlikely to change course from its campaign against inflation.

Michigan Consumer Sentiment ended June at a four-month high, amid more sanguine expectations about inflation across the spectrum. Let’s see if this optimism continues.

“Overall, this striking upswing reflects a recovery in attitudes generated by the early-month resolution of the debt ceiling crisis, along with more positive feelings over softening inflation. Views of their own personal financial situation were unchanged, however, as persistent high prices and expenses continued to weigh on consumers”

– Surveys of Consumers Director Joanne Hsu

Charts

Bitcoin Weekly Chart

On the weekly time scale, BTC appears to be in breakout mode. That said, it’s reached the top of a local range that extends to 31.5k. The risk/reward on taking a lot of risk here in the crypto space is quite low until that level turns into support. Meantime the main area to look for longs remains 28k if we get the retest.

Bitcoin 4H Chart

The 29.5-31.5 intraday range remains intact. Nothing too crazy here. Play the levels.

S&P500 Daily Chart

SPX remains constructive as long as it plays this 4328-4448 range or breaks above. Bulls may need some patience as there’s been a bit of local slowing in the trend advancement. That doesn’t mean the move is dying, but it’s a ‘proceed with caution while still looking to buy the dips’ kind of signal for me.

Break above 4448 and the bull party is fully back on; break under 4328 and it’s time to consider larger cash positions.

Total2 Market Cap Daily Chart

Overall market cap without BTC continues to stair-step higher and we’re trying to form a higher low around 542B. It’s following our projected path so far despite the recent setback. You don’t want to see it close below 531B as that would constitute a bearish trend change.

I’m traveling to the West Coast tomorrow, so getting this out early. Have a great weekend!

Jay Charles

Editor in Chief, The Trading Tank.

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