On Monday we looked at the $SPY:

  • I recognized a few things:
    • Old support level at ~$390 could be the new resistance level for the next leg up
    • SPY could peak at ~$390 over the next few days
    • Market may price in Fed rate hikes starting this week (FOMC is next Wednesday)

Here’s where we are today:

  • Strong green candles working their way up to the resistance line we pointed out on Monday
  • Note how pre-market is starting off lower than yesterday’s close
    • This means price strength is waning and price is preparing to peak at ~$390
    • If price pushes above this threshold, the next line of resistance is the downtrend from ATH
  • Markets may start pricing in new rate hikes today before FOMC next Wednesday

Let’s dig deeper

Microsoft

  • Microsoft is starting off the day losing everything it gained yesterday
  • Down almost 6%
  • The downtrend continues – bear market rallies should not be confused with the start of a bull run

Commodities / Energy

  • Commodities are doing well compared to tech
  • People still need to turn their lights on and fuel their cars – even in a recession
  • Exxon is up pre-market, continuing the uptrend and making higher highs
  • Chevron is also up pre-market
  • Looking to test previous high from a possible double bottom formation

Two Critical Catalysts (Opinion)

  1. If the Fed is dovish next Wednesday, the markets could rally hard. There’s a possibility that the rate increases will be minimal leading up to midterm elections on November 8
  2. If Republicans win the House and Senate on November 8, the narrative behind “recession” will dramatically change. Although markets may rally on the change in congressional political power immediately after the elections, don’t be surprised to see an increase in FUD (fear, uncertainty, and doubt) perpetuated by the media in the weeks and months after the midterms – there will be new characters to point fingers at when the blame games start.

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The Rebel Economist
Author: The Rebel Economist

Civil Engineer // Aviator // Photographer // Avid Coffee Enthusiast // Your investment strategies could differ from mine based on your risk tolerances, research, and time horizon, so I encourage you to do your own research as information provided by The Rebel Economist or Breaking Metrics should never be considered financial advice.

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