The market finished last week on a strong note with a typical bear market rally based on nothing more than a few key stocks rallying and some short covering into options expiration. The weird thing about it is that the narratives “peak inflation” and “the Fed will pause” were provided as the reasons, not that there was anything overtly positive from a macroeconomic perspective to justify the end of last week’s carnage.
For the week, all three major indices were down with the NASDAQ and S&P 500 getting hit the hardest.
In fact the daily S&P 500 chart demonstrates that fact as the rally did not even get the markets back to where the week started:
There is a shot that the markets could run up above the declining 50 day moving average and fill the gap up to the low 4000’s this week. The narrative of course will be the Fed has this under control, inflation is topping out, and the market has already adjusted to the new economic reality.
In other words, total bovine scattology.
The weekly chart reflects a potential charge to the upside also:
Soon enough however, the technical formation of the last candle will either be a proven hammer or just another hanging man. Either way on the daily or weekly charts, one thing is obvious; there is no commitment to direction in this market yet. Selling continues by the large institutions into every rally and overall volumes since the big liquidation in June has been lethargic if not downright pitiful.
Stay tuned as earnings season starts to wind down over this week and next and the harsh reality of a European economic collapse and the political renewal to lockdown over the China virus in China and the US begins again hits the markets with a triple whammy.
The real fireworks, economically speaking, will begin in August. That’s when the bear will eat.