7/16/2021

Yesterday's Fed meeting started the increasing choppiness and uncertainty in the markets that eventually led to a broad selloff in the equities, gold and crypto markets. The Fed has stated that they are not comfortable with the rise in inflation, but they want to maintain course and keep the plan they had going in. They also said that they will discuss potential tapering (reducing their asset purchases) in the coming weeks.

USD- CPI m/m higher than expected at 0.9%, miss
PPI m/m 1%, beat
Unemployment Claims 360K, miss
Retail Sales m/m 0.6%, beat

Our outlook

I think you'll start seeing more articles out there that will tell you that a crash in imminent and that you should start thinking about selling everything because we have reached a top in the market. Although this could be true- the market has been overvalued for several years, but what's new?- this is something we've seen time and time again. According to the Fed, the US is a long way from total recovery, so that must mean that they aren't going to stop trying to fix the economy (they're still holding bonds and buying monthly, still printing money).

The key thing to note is that the market is rebounding, and it has been rebounding for some time since the pandemic. Quarterly GDP rose 6.4% while sales increased overall in the US. The US labor force is getting larger as many people are returning to work as well. However, unemployment claims and unemployment rate is higher than expected. The delta strain is a concern too since the fear of another shutdown is always something to consider happening in times like these.

But something we might overlook in the midst of a market dip is to stop shifting to a fear of a recession every time the market has a red week. Obviously, I could be wrong, but historically- other than a sudden government shut down- bad news ends up passing after some time. There would have to be some real bad news to catalyze a crash in my opinion.

This week's earnings surpassed analyst expectations as we wait to see earnings coming up next week.

Trade Setups

SPX500

SPX500 came down again this morning to continue the hard sell off from yesterday. Price is showing rejection from the lows on the 1H chart, and would form a higher low if price maintains at this level. If price falls, there is some key support around $4,332.

NAS100

NAS100 fell hard this morning as tech stocks tumble. Price is currently on support on the 4H around $14,720s. Additional support is below around $14,556.

UK100

UK100 largely up for the day after bouncing off the bottom of a wedge formation on the 4H chart. The index has traded relatively flat although it tends to oscillate in between the top and the bottom and its 200 SMA.