Good morning. Futures are lower after the ECB hiked rates .75%. Seems the negative rates of yesteryear are gone.
We remain in a very precarious position for the equity market. Still, amid the most negative backdrop in over a decade, stocks are 'hanging in there'.
The S&P500 is some 77% above the COVID lows in March 2020.
The US DOLLAR made a new 20+ year high yesterday. Not only did QE not kill the USD and turn it into toilet paper, its stronger than its been in a long long time.
A stronger US Dollar will help quell some of the inflation. As will higher interest rates.
We are seeing energy prices ease a bit this week. Thats big news on the inflation front.
That $SPY 390 level remains in focus. Lets look at the daily SPY chart.
You can see where support is. Momentum remains in the gutter. A turn off support here could see equites mount an unexpected September rally to the $420 area.
On the flip side, a sustained break will trigger the next leg lower to the SPY $330 area. The recent price action is giving little indication of what lies ahead.
If the US DOLLAR comes back down from 20+ year highs, the VIX begins to melt toward 20, and bonds get s reprieve from the recent selling, we could see a nice rally for the stock market.
And yet we are one swift pull back, like the one we saw last Friday, from seeing the entire market embark on another ugly leg lower.
Have a great trading day 🙂