The bears engaged despite the better-than-expected PPI report reminding traders of the danger of chasing an over-extended condition.  The good news is one day does not make a trend, so although the index patterns raised some uncertainty, it is how we follow through today.  So, will the bulls step up and defend support levels, or will the bears continue to attack?  With potential market-moving economic reports and earnings, anything is possible, and the danger of big price whipsaws continues.

Overnight Asian markets traded mixed due to uncertainty.  European markets also look lower this morning as bullish sentiment wains.  U.S. futures point to a bearish open ahead of earnings and economic reports that could quickly enhance or reverse market direction, so plan carefully.

Economic Calendar

Earnings Calendar

Thursday is typically the busiest earnings day of the week, and today is no different.  Notable reports include AAL, CMA, CBSH, FAST, FITB, HTLD, KEY, NFLX, MTB, NTRS, PPG, PG, SJR, SIVB, & TFC.

News & Technicals’

Jamie Dimon believes interest rates could go higher than the Federal Reserve projects as inflation remains stubbornly high.  “I actually think rates are probably going higher than 5% … because I think there’s a lot of underlying inflation, which won’t go away so quickly,” Dimon Thursday from the World Economic Forum. 

Hertz is teaming up with the city of Denver to build out its EV-charging infrastructure.  The rental car company will add more than 5,000 electric vehicles to its Denver fleet, install public EV chargers, and offer tools and training in and around the city.  Hertz hopes to strike similar deals with other cities around the country. 

According to people familiar with the matter, Bed Bath & Beyond has been in discussions with lenders as it tries to nail down financing that would keep it afloat during a likely bankruptcy filing.  The people said that the company is also running a sale process in hopes of selling its home goods chain of stores, as well as its Buybuy Baby banner.  Interested buyers include Sycamore Partners and Authentic Brands, they added. 

The danger of chasing an overextended market condition made itself apparent on Wednesday as the bears engaged, testing index support levels by the close of the day.  Though the IWM and DIA continue to hold above long-term downtrends, they also left behind some bearish patterns raising some uncertainty.  The more significant issue is the possibility the QQQ and SPY created lower highs in the prolonged bear trend.  Keep in mind one day does not make a trend, so the big question is how the indexes follow through today with potential market-moving economic data pending.  Big price moves, both up and down, remain possible, making for dangerous trading conditions.  Plan your risk carefully.

Trade Wisely,

Doug

Following a mixed bag of earnings created mixed index results as the DIA reversed sharply and QQQ closed slightly positive at the close.  However, the day increased uncertainty with anemic volume and a rising VIX facing a busy Wednesday of market-moving economic reports.  The bulls seem to have no concern about the weakening economic conditions or the likely recession.  However, the market conditions could quickly produce big moves up or down, so plan your risk carefully.

During the night, Asian markets primarily rallied as the Band of Japan surprised the market, making no change to the yen yield range.  European markets trade modestly higher this morning as the UK inflation rate declines for the second consecutive month to 10.7%.  The U.S. futures have recovered from some overnight lows to trying to put on a brave face ahead of the market-moving PPI, Retail Sales, and Industrial Production numbers.

Economic Calendar

Earnings Calendar

The number of notables will increase today and Thursday, back off on Friday, and then it gets nuts for a few weeks.  Notable reports include AA, DFX, FHN, FUL, KMI, PNC, PLD, SCHW & WTFC.

News & Technicals’

Analysts believe that Russian President Vladimir Putin could be ready to announce another mobilization round as Russia looks to bolster its armed forces in Ukraine.  “Putin may announce a second mobilization wave to expand his army in the coming days—possibly as early as January 18,” analysts at the Institute for the Study of War said Tuesday. 

United Airlines’ fourth-quarter profit topped Wall Street estimates thanks to strong demand and high fares.  United expects to expand by flying 20% in the first quarter from a year ago.  United executives will hold a call with analysts and media on Wednesday at 10:30 a.m. ET. 

The Japanese yen weakened by more than 2% after the Bank of Japan announced no changes to its yield curve control.  Coinbase’s decision to exit comes only a few weeks after rival exchange Kraken said it would cease its operations in Japan this month.  In addition, several firms have suffered from waning investor appetite for crypto after the major exchange FTX blew up in September.

A mix of earnings data created mixed index results on Tuesday, with the DIA reversing Friday’s strong rally, but the QQQ managed to squeak out a $0.57 gain at the close.  The VIX rallied, but the volume was very light, facing PMI and Retail Sales numbers before today’s morning bell.  We also have several notable earnings reports with Industrial Production, Business Inventories, Housing Market Index, Beige Book, Treasury International, and Fed speakers tossed in for good measure.  Despite the uncertainty, the T2122 indicator continues to warn of a short-term overbought condition, and the bulls appear to have little to no concern about recession or the weakening economic data points.  Big moves are possible in either direction, so plan your risk carefully.

Trade Wisely,

Doug

With money markets flush with capital due to institutional recession warnings, the VIX dropped dramatically last week on relatively light volume.  The only explanation I can come up with is that the CTA algorithms are buying up stocks, and institutions are buying the dark pools while continuing to warn retail investors of the tough times ahead.  However, one thing seems inevitable with all the data coming our way in the next several weeks.  Wild price fluctuations, big-point intraday whipsaws, and overnight reversals will likely make conditions challenging and dangerous for retail traders.  Plan your risk carefully!

Asian markets traded mostly lower as data suggested the Chinese economy grew by 3%, and the population declined for the first time in a decade.  European markets so modest declines across the board this morning.  U.S. futures currently suggest a modestly lower open but could quickly change as we wait on earnings and economic data that could move the market suddenly and substantially. 

Economic Calendar

Earnings Calendar

The number of earnings ramp up this week so prepare for volatility.  Notable reports include CFG, FULT, GS, IBKR, MS, PRGS, SBNY, & UAL.

News & Technicals’

Goldman will report this morning with Wall Street expecting earnings of $5.48 per share, 49% lower than a year earlier, according to Refinitiv.  In addition, revenue is expected to be 14% low than a year earlier at $10.83 Billion. 

China’s population declined in 2022, the National Bureau of Statistics said Tuesday.  The drop was the first since the early 1960s, according to Yi Fuxian, a critic of China’s one-child policy and author of the book “Big Country With an Empty Nest.”  The statistics bureau said that Mainland China’s population, excluding foreigners, fell by 850,000 people in 2022 to 1.41 billion.  The country reported 9.56 million births and 10.41 million deaths in 2022. 

Some 73% of CEOs think global growth will decline in the next year, according to a new survey by PwC.  The survey was made up of 4,410 CEOs across 105 countries.  It also showed that almost 40% believe their business will not be economically viable within a decade on current trajectories.

While volume remained low last week, the VIX dropped dramatically, suggesting no fear in the market.  At the same time, economic indicators continue to suggest a recession, and money market funds are flush with capital.  It would seem institutions are quietly buying in the dark pools, and their CTA algorithms are buying stocks while continuing to warn retail investors of difficult times in the year ahead.  With the next several weeks chalked full of earnings reports, expect considerable price volatility despite the collapsing VIX.   Add in some big market morning reports like PPI, Retail Sales, manufacturing and housing data, substantial price whipsaws, and overnight reversals should be expected.  Plan carefully!

Trade Wisely,

Doug

With investors anticipating better numbers in this morning’s pending CPI report, the bulls pushed higher with nervous energy as the VIX rose simultaneously.  Jobless claims will be the next hurdle to cross this morning, and then Friday morning’s big bank reports will become the center of attention for the market.  The coming 3-day weekend may be a welcome respite after the wild price volatility we will likely experience over the next 48 hours.  But, of course, anything is possible, so be prepared for big point moves that may include quick whipsaws as the drama unfolds.

Asian markets mainly saw modest gains overnight with eyes on pending inflation data.  European markets have stretched to their highest level since April 2022 on a report the eurozone may outperform the U.S. in 2023.  With the highly anticipated CPI report pending, U.S. futures suggest a flat open, holding their breath, hopeful the numbers show the current FOMC rates are good enough.

Economic Calendar

Earnings Calendar

We have a few more small-cap companies reporting today, but the only notables are INFY and TSM.

News & Techncals’

Economists expect a slight decline in December’s consumer price index when it is released Thursday at 8:30 a.m. ET.  The consensus forecast for CPI is for a decrease of 0.1% on a monthly basis but a 6.5% increase from the prior year, according to Dow Jones.  Stocks rallied Wednesday ahead of the report on expectations the data will show a continued easing of inflation pressures and optimism that it could slow the Federal Reserve’s rate hiking. 

Zeynep Ozturk-Unlu, Deutsche Bank’s chief investment officer for EMEA, said she could see Europe outperforming the U.S. in economic growth and capital markets in 2023.  Other analysts also told CNBC they believe the U.S. had reached the end of a post-Global Financial Crisis rally.  Moreover, some early data points look positive for the eurozone compared to the U.S. 

Ubisoft shares slumped as low as 18.80 euros apiece Thursday morning, hitting their lowest level in more than seven years.  Ubisoft said Wednesday it expects full-year net bookings will likely fall 10% after an earlier forecast called for a 10% increase.  It’s the third gaming firm this week to issue a disappointing trading update.  Devolver Digital and Frontier Developments issued separate profit warnings on Monday.

The bulls pushed higher on Wednesday, speculation that the pending CPI report will show a decline, but interestingly the VIX also rallied on another rather anemic volume day.  Before the opening, we will get earnings from TSM and INFY, along with highly anticipated inflation and Jobless Claims numbers.  Traders should prepare for some wild price gyrations as the market reacts.  Will it be the bulls or bears inspired?  We will soon find out!  Though we have some Fed speakers and a 30-year bond auction, Treasury Statement, and Fed Balance Sheet later in the day, market attention will quickly shift to big bank reports happening Friday before the bell.  Buckle up, it’s going to be a wild end to the trading week as we head into a 3-day weekend.

Trade Wisley,

Doug

Tuesday’s anemic price action though bullish, recorded activity that was substantially lower than the pre-holiday volume of Christmas and the New Year.  The pending CPI report Thursday and the big bank reports Friday, both happening before the bell, have raised the market uncertainty understandably high.  We should expect big price moves by the end of the week, but the question is, in what direction will all this wound-tight emotion explode?  Trade wisely because this is a  dangerous market condition for retail traders!

Asian markets mostly rallied overnight, with only Shanghai seeing a modest decline while we slept.  European markets are in rally mode this morning, looking to recover Tuesday’s weakness with uncertainty ahead.  U.S. futures are once again pumping a bullish open, trying to put on a brave face with another day of low volume likely as we wait on the CPI and the official kickoff of earnings.  Buckle up anything is possible by the end of the week.

Economic Calendar

Earnings Calendar

We have a very light day on the earnings calendar, with just one confirmed report coming from KBH after the bell. 

News & Technicals’

Wells Fargo is stepping back from the housing market.  Instead of its previous goal of reaching as many Americans as possible, the company will now focus on home loans for existing bank and wealth management customers and borrowers in minority communities.  As part of its reduction, Wells Fargo is shuttering its correspondent business that buys loans made by third-party lenders and “significantly” shrinks its mortgage-servicing portfolio through asset sales.  Altogether, the shift will result in a fresh round of layoffs for the bank’s mortgage operations, executives acknowledged, but they declined to quantify how many jobs will be lost. 

Fed Chairman Jerome Powell noted that stabilizing prices requires making tough decisions that can be unpopular politically.  In other remarks, the central bank leader said the Fed is “not, and will not be, a ‘climate policymaker.’” 

The World Bank slashed its 2023 global economic growth outlook to 1.7% 2023 from its earlier projection of 3%.  It would mark “the third weakest pace of growth in nearly three decades, overshadowed only by the global recessions caused by the pandemic and the global financial crisis,” the World Bank said. 

Although the indexes held the breakout support, the activity was lower than the pre-holiday volume of both Christmas and New Year trading.  Unfortunately, there is a good chance we could see more of the same with the light earings and economic calendar on Wednesday.  The uncertainty of the Thursday CPI report and the official beginning of 1^st quarter earnings as the big banks begin to report on Friday is likely the reason for the anemic volume.  The last couple of weeks of range-bound trading has wound the spring on the indexes very tight, and it’s likely to create some tremendous price volatility at the end of the week.  The big question is, which way will it pop?  Be careful not to overtrade out of boredom, and be prepared for the explosion of emotion just around the corner.

Trade Wisely,

Doug

The bulls pushed hard, but overhead price resistance found bears waiting and willing to fight back, leaving some potential topping patterns behind.  Jerome Powell’s comments this morning will likely cast the deciding vote on whether the bulls matain the Friday consolidation breakout or if the bears regain the upper hand.  With a pending CPI report and big bank earnings just around the corner, speculation and uncertainty are high so brace for considerable volatility in the days ahead.  Anything is possible!

During the night, Asian markets closed the day mixed with an eye on Jerome Powell.  European markets trade modestly bearish across the board this morning, weighing inflation concerns and pending Fed comments.  U.S. futures point to a gap as we wait to find out if the FOMC plans to stay on the hawkish path, bucking all the talking heads trying to promote the pivot narrative.  Brace yourself for wild price action likely in the days ahead.

Economic Calendar

Earnings Calendar

We have just five confirmed reports this Tuesday, but only a couple of them are somewhat notable such as ACI and BBBY. 

News & Technicals’

The global investment bank is letting go of as many as 3,200 employees starting Wednesday, according to a person with knowledge of the firm’s plans.  That amounts to 6.5% of the 49,100 employees Goldman had in October, which is below the 8% reported last month as the upper end of possible cuts.  However, other investment banks are adopting a “wait and see” attitude: If revenues are tracking below estimates in February and March, the industry could cut more workers, said a person familiar with a leading Wall Street firm’s processes. 

According to an email obtained by CNBC, Disney CEO Bob Iger told hybrid employees on Monday they must return to corporate offices four days a week starting March 1.  Iger’s four-day-per-week stipulation is relatively strict compared with other large companies, many of which have opted for two or three mandated in-office days for hybrid employees.  Moreover, it comes less than two months after he returned to the company’s helm. 

CNBC’s Jim Cramer told investors to stay away from tech stocks, even after their gains on Monday.  “These short-term sector rotations like we saw today — they’re irrelevant because they can’t last.  Think renters, not owners.  The fundamentals, now they last,” he said. 

The bulls followed through on Monday but faded into the afternoon, leaving behind some worrisome potential topping patterns at price resistance.  Earnings uncertainty and worries about higher rates inspired the bears to push back as we wait on a Jerome Powell speech this morning.  Will he continue to sound hawkish disappointing traders that talking heads continue to push the narrative of a Fed pivot?  We will soon find out and should expect substantial price volatility as the market reacts to his comments.  Past that, we won’t have much for the market to react to as we wait on the Thursday CPI and the start of big bank earnings.  Nevertheless, speculation remains high, so plan your risk carefully.

Trade Wisely,

Doug

The bulls fueled by hope of declining inflation looked past economic data showing contracting economy to break the consolidation trigging the classic short squeeze.  The DIA remains the strongest index and the only one above its 50 day morning average and long-term bearish downtrend.  With worries of recession and the ramp up for 1^st quarter earnings beginning this week traders should plan for considerable price volatility.  There is no shortage of highly emotional speculation so expect big point moves and punishing whipsaw as well as full overnight reversals as drama unfolds.

While we slept Asian markets rallied with the tech heavy HSI leaning the way higher up 1.89% at the close.  European markets also trade mostly bullish with the reopening of China providing the inspiration.  U.S. point to bullish open trying to follow through on Friday’s but with so much overhead resistance in the SPY, QQQ and IWM we can’t rule out the possibility of a pop and drop, so be careful rushing in with a fear of missing out. 

Economic Calendar

Earnings Calendar

We start to step up on the earnings this week and should expect considerable volatility with some big bank earnings at the end of the week.  Notable for Monday include AYI, AZZ, JEF, CMC, PSMT, TLRY, WDFC.

News & Technicals’

Bolsonaro’s supporters stormed Brazil’s Congress, Supreme Court and presidential palace in Brasilia on Sunday.  The demonstrators refused to accept Bolsonaro’s legitimate electoral defeat to leftist rival Luiz Ignacio Lula da Silva.  “The coup plotters who promoted the destruction of public property in Brasilia are being identified and will be punished,” Lula said in a tweet, vowing to resume work in the palace on Monday.

At around 35,000 feet, the Virgin Orbit rocket will be deployed over the Atlantic, carrying nine small satellites into orbit in what is known as a horizontal launch.  Crowds are expected to gather to watch the event, with Spaceport Cornwall having invited the general public to witness what they have described as a “historic moment.”  The designated launch event will also include a “silent disco” tent.

The U.S. House of Representatives elected Kevin McCarthy of California as speaker in the 15th round of votes early Saturday.  McCarthy made extraordinary concessions to win over a small bloc of far-right holdouts who blocked his speaker bid.  McCarthy said the tense showdown on the House floor this week was proof that he is not someone who gives up easily.

Although Friday’s economic data continued to show a slowing economy the hope that inflation pressures are easing inspired the bulls to break the consolidation log jam trigging the classic short squeeze.  Though we have a relatively light economic calendar this week Tuesday we will have to deal with a Jerome Powell speech and CPI reading on Thursday as earnings season ramps up.  Emotion and uncertainty are high so traders should plan for considerable volatility as worries of recession continue to loom.  The Dow remains the strongest of the indexes with the SPY, QQQ, and IWM remain under the long-term bearish trends and considerable resistance.  Expect substantial point whipsaws and punishing overnight reversals in the days and weeks ahead. 

Trade wisely,

Doug

While encouraging to see a second day of gains, not much changed yesterday as the wide-range consolidation continues, unable to break through the upper resistance at the close.  However, there seems to be a willingness to ignore the economic data pointing to a contraction of the U.S. economy.  Today we get more job data along with international trade and energy figures as FOMC members resume their public conversations.  Observe the substantial overhead resistance levels if they beak for a possible short squeeze to be triggered.  On the other hand, if it fails to break, prepare for selling to resume pushing back into the consolidation range.

Asian markets saw gains overnight, and the European markets trade mixed as they came to terms with the continued hawkishness of the FOMC.  U.S. futures have once again rebounded off overnight lows heading into the open ahead of earnings and potential market-moving economic reports amid some substantial layoff news in the tech sector. 

Economic Calendar

Earnings Calendar

We have a bit more activity on the earnings calendar today.  Notable reports include ANGO, BBY, CAG, STZ, HELE, LNN, NEOG, SCHN, & WBA.

News & Technicals’

Amazon, one of the largest employers in the U.S., is scaling back more than it had anticipated.  Andy Jassy, Amazon’s CEO, said an employee leaked the plans, prompting him to make a public announcement.  “Amazon has weathered uncertain and difficult economies in the past, and we will continue to do so,” Jassy wrote in a memo.  However, they plan to cut over 18,000 positions from the reported number of 10,000.  Salesforce is cutting 10% of its personnel (more than 7000 positions) and reducing some office space as part of a restructuring plan.  Co-CEO Marc Benioff told employees that customers had been more “measured” in their buying decisions in the challenging macroeconomic environment.  The cloud-based software company let go of hundreds of employees in November.  CNBC’s Jim Cramer on Wednesday warned investors that the tech industry would likely see more layoffs due to continuing macroeconomic headwinds. 

The U.S. House of Representatives adjourned for the night with no one being elected speaker, paralyzing Congress and deepening the longstanding schisms within the Republican Party.  After six votes over two days, GOP leader Kevin McCarthy, R-Calif., failed to secure enough support to win the House speakership.  The latest votes saw GOP holdouts nominate and vote for Florida Rep. Byron Donalds.

According to analyst estimates, Samsung’s profit could nosedive nearly 50% when it reports its fourth-quarter earnings guidance.  The pessimism stems from a rapid fall in NAND and DRAM memory prices.  Samsung is the global leader in memory chips.  However, NAND and DRAM prices have fallen sharply in the fourth quarter due to a lack of demand for the products they eventually go into, such as PCs.

While it may have been refreshing to see a second day of gains, the wide-ranging consolidation continues, with the price action unable to breach upper resistance levels by the close of the day.  The jobs data continues to roll in such a manner to keep the Fed engaged in continuing to raise rates, and according to the FOMC minutes released yesterday, their willingness to do so seems resolute.  In addition, the ISM number indicated that the U.S. economy is still in contraction, adding worry to recessionary thoughts for the year ahead.  Today we get more job data along with international trade and energy figures as Fed members resume public comments.  Keep a close eye on the consolidation resistance as they continue to pump the premarket, trying to inspire enough buying to break through despite the poor economic numbers. 

Trade Wisely,

Doug

Tuesday’s price action had plenty of up/down drama but, at the end of the day, left more questions than answers as the choppy consolidation in the indexes continues.  The sharp selling in Apple and Tesla didn’t help market sentiment as the uncertainty of 2023 weighs heavily, with PMI numbers continuing to show contraction in the economy.  Today we face ISM, JOLTS, and FOMC minutes release with another light day of earnings as the bulls and bear fight to find inspiration to break the consolidation log jam.  Expect more chop and uncertainty today.

Overnight Asian markets mostly rallied, with the tech-heavy HIS leading the way up 3.22% at the close.  European markets are decidedly bullish this morning, buoyed after Germany published a better-than-expected inflation rate of 9.6%.  Once again, the futures point to a gap up open to test the consolidation resistance hoping to inspire the bulls ahead of the economic data.

Economic Calendar

Earnings  Calendar

We have five confirmed earnings reports for today, but only these three are somewhat notable RGP, SLP &UNF.

News & Technicals’

The House of Representatives adjourned for the day Tuesday without a Speaker after Republican leader Kevin McCarthy failed in three consecutive votes to secure enough support to be elected to the post.  After the first ballot resulted in votes for several Republicans, the next two rounds saw McCarthy’s opponents coalesce around a new contender: Rep. Jim Jordan of Ohio, a longtime McCarthy ally.  It was the first time in 100 years that the majority party had failed to coalesce around a candidate for Speaker, and it was uncertain what McCarthy’s next steps would be. 

Nezha, named after a feisty Chinese mythological character, claims its car deliveries will more than double in 2022.  The total surpassed Nio’s, emphasizing its focus on the premium segment while hinting at plans to launch a mass-market brand.  While Nezha sells budget-priced vehicles, similar to the highly popular Hongguang Mini EV, Nezha’s vehicles are larger. 

In its 2023 macro outlook, Goldman Sachs forecasts a 1.2% contraction in the U.K. real GDP over the course of this year, well below all other G-10 (Group of Ten) major economies.  A 0.9% expansion would follow this in 2024.  The figure places Britain only fractionally ahead of Russia, which is projected to see a 1.3% contraction in 2023 as it wages war in Ukraine and weathers punitive Western economic sanctions. 

Tuesday’s price action left behind more questions than answers as the wide rage choppy consolidation continues with so much uncertainty about the path forward in 2023.  Economic data continued to show the U.S. Economy is slowing yesterday, with PMI numbers still in contraction.  Adding to the worries was the sharp selling in both Apple and Tesla that not so long ago were considered market bellwethers that could do no wrong.  This morning we face a potential market-moving ISM reading, a JOTLS report that has proven stubbornly sticky, and FOMC minutes likely confirm a resolute FOMC in combatting inflation.  That said, the U.S. futures are again trying to pump up the bullish hope in premarket, suggesting another gap into the consolidation resistance. 

Trade Wisely,

Doug

Over-speculation created a wild ride on Tuesday, and all that emotion could explode in another round of extreme price volatility with Powell in focus.  Will he deliver the hoped-for pivot comments at the press conference allowing Santa to party with a rally into the year’s end?  Or will he continue the hawkish tough talk on inflation and unleash the Grinch?  With so much uncertainty, plan for a choppy morning session as we wait, followed by another wild ride of volatility this afternoon that may set the market direction for the remainder of the year. 

Asian markets rallied with modest gains after a relaxing read on inflation with all eyes on Powell.  European markets, however, trade in the red this morning, with energy prices easing their inflation slightly.  With Powell’s press conference on tap, U.S. futures have reversed some overnight bullishness to suggest a flat to slightly bearish open.  However, anything is possible with market emotion high, so plan your risk carefully!

Economic Calendar

Earnings Calendar

We have a few more reports on the Wednesday earnings calendar, but the market-moving reports are falling by the wayside.  Notable reports include LEN, MITK, NDSN, REVG, & TCOM.

News & Technicals’

A Bahamas judge denied FTX founder Sam Bankman-Fried bail and said he should be remanded to custody until February 2023, citing a heightened flight risk for the onetime billionaire.  Bankman-Fried claimed he was down to just $100,000, a stark comedown for the former crypto titan.  The Digital Commodities Consumer Protection Act is among the solutions lawmakers will consider as they probe the implosion of crypto exchange FTX and try to implement industry safeguards.  The legislation would give the Commodity Futures Trading Commission more oversight.  However, some crypto advocates say it doesn’t go far enough to protect certain kinds of exchanges.

The Federal Reserve is expected to raise interest rates by a half percentage point Wednesday yet signal it will continue its battle against inflation.  However, economists expect Fed Chair Jerome Powell to tilt toward the hawkish side in an effort to impress on markets that the central bank is not ready to give up its rate-hiking stance.  CNBC’s Jim Cramer on Tuesday outlined what needs to happen for the Federal Reserve to finally beat inflation.  “Without a well-deserved crash in crypto and a sign of higher unemployment acknowledged by [Federal Reserve Chair] Jay Powell, this CPI reading has to be treated as a one-off number,” he said.

Tuesday was a wild ride of over-speculation and over-hyped emotion, with Powell in focus!  Investors continue to hope for an FOMC pivot, but Powell is expected to raise rates by another 50 basis points today.  However, it is not likely that the act of raising rates will cause market volatility this afternoon; the press conference will light up the eratic market emotion after that.  Nevertheless, if Powell continues his tough stance on inflation and tamps down the idea of a quick pivot, it will likely disappoint the market and diminish the hope of an end-of-year Santa rally.  However, if he is perceived to be ready to back off and become more dovish, the market will celebrate, and the Santa rally could party until the end of the year!  Although it may be a choppy morning session, as we wait, the pent-up emotion will likely explode in wildly volatile price action this afternoon.  Plan carefully amid the massive uncertainty of what comes next.

Trade Wisely,

Doug