Breaking Chart Alerts Daily Newsletter 9/22/2022

Breaking Chart Alerts Daily Newsletter 9/22/2022

Good Morning Traders


Good morning! We had a very eventful day yesterday from the start with Putin declaring partial deployment of veteran troops into Ukraine on official declaration. From the markets perspective the indices did not take well to this news but we did see a pop in Military Defense stocks to start the day.


President Biden’s speech to the United Nations did touch on the invasion of Russian troops, stating that “The U.N. Charter’s very basis of a stable and just rule-based order is under attack”.


We followed these events up with the Federal Reserve raising Interest Rates again another 75 basis points which was expected. The markets had an immediate plunge on this release but shortly after started to climb back to previously traded levels before the announcement.


Fed chair Powell gave his press conference at 2:30 and delivered what I could call a not so hawkish and not so dovish stance on the state of the economy. He stated that while the job markets remain string, the FOMC will need to continue its aggressive stance on monetary tightening in order to bring down inflation.


So far this monetary policy has not been as effective as they had planned and he stated they will be as aggressive as needed until they see these numbers start to regulate and the economy start to come back to a sustainable growth rate. A growth rate that is currently 0.2% vs. their 1.8 trend they would like to see it at.


Clearly we have a long way to go and as quoted “a lot more pain is ahead of us”. Pain that is necessary now in order to begin to bring these numbers down. I expect to see the continuation of a slowing housing market as it falls back down to more “realistic” ( I use that term very loosely) levels.


As well we should expect to see unemployment rates start to rise in order to curb consumer/ retail demand and allow supply chains to regulate themselves. We got a large drop in the markets following this speech and expect to see much more “pain” ahead. We will be positioning our portfolios accordingly based on this sentiment.


Lastly we saw UST bonds surpass 4% yields. A number which shouldn’t make sense as we have such an aggressive Fed tightening policy going with nominal rates at 3.25% while inflation runs hot at 8.3%.


So in reality real rates are at a negative 5%. Strange to see US and foreign investing bodies flooding into long term USTs while real rates are at such negative numbers. We will be watching carefully these next few weeks to see how the markets respond! 


As always practice proper risk management and Good Luck! 




Top Upgrades, Downgrades, Initiations, Pre-Market Movers, Unusual Options Activity, and Economic News







Pre-Market Movers



















Unusual Options Activity



Economic news



Five Things You Need to Know to Start Your Day

1. Tight Fed



The Fed delivered a 75 basis-point hike yesterday, and admitted there will be below-trend growth for a period. Seema Shah of Principal Global Advisers says this should be interpreted as central-bank speak for “recession”. The Dot Plot was revised higher, with FOMC members expecting rates to reach 4.4% this year and 4.6% next year. After the announcement, Goldman raised their forecast, now expecting a peak Fed Funds rate of 4.5% to 4.75%, from 4% to 4.25% previously.

2. Rates bonanza



Central-bank action is also heating up across the Atlantic today. The Bank of England’s Governor Andrew Bailey will probably engineer a 50-bp rate increase today, though some analysts predict a 75-bp move — which would be the biggest since 1989. The Swiss National Bank raised interest rates by 75 basis points to bring borrowing costs above zero for the first time in almost eight years, following recent moves in the euro region. Earlier, Norway’s central bank raised its key interest rate by a half point.

3. Yen intervention



Japan intervened in the foreign-exchange market for the first time since 1998, spurring a rally in the yen. Top currency official Masato Kanda said on Thursday that the nation had intervened in the currency market as the moves were sudden and one-sided. The move, coming amid a widening policy divergence with the US, indicates how a pain threshold had been reached as hedge funds kept adding to short bets on the yen.

4. Dollar drops



The dollar fell against all its Group of 10 peers except the Swiss franc. Stocks wavered after a host of central banks followed the Fed with rate hikes. Europe’s Stoxx 600 pared an early loss to trade 0.7% lower as of 5:36 a.m. New York time. S&P 500 futures swung to a gain after the benchmark’s slide Wednesday took it more than 20% below the record high in January. This week’s MLIV Pulse survey focuses on technology. Please click here to participate.

5. Coming up…



Ok, the tsunami of central-bank meetings is receding, and longer-term traders will want to sit back and make sense of it all. Fortunately, the rest of the day is relatively light on the data front, with only US unemployment claims, the current account and the CB leading index to get through. Earnings include Costco, Accenture, FedEx, Factset, Darden Restaurants. The pace picks up again on Friday with PMI readings.

And finally, here’s what Joe’s interested in this morning

I missed watching the Fed press conference yesterday (due to various other things going on), but one benefit of that is getting to read the transcript after the fact with fresh eyes, not influenced by what everyone is saying about it in real time.



Of course, I did see that the stock market tanked again, so the hawkish message was clear either way.

Anyway, reading through it this morning, there were three moments that really stood out to me, and each one of them deal with the centrality of the labor market tightness to the Fed’s thinking.

First, from Powell’s introductory remarks where he notes that yes, there are clear signs of rate hikes having a slowing effect, but that labor market strength (or tightness) has remained stubborn.

Activity in the housing sector has weakened significantly in large part, reflecting higher mortgage rates. Higher interest rates and slower output growth also appear to be weighing on business fixed investment, while weaker economic growth abroad is restraining exports.

As shown in our summary of economic projections, since June, FOMC participants have marked down their projections for economic activity, with the median projection for real GDP growth standing at just 0.2 percent this year and 1.2 percent next year, well below the median estimate of the longer-run normal growth rate.

Despite the slowdown in growth, the labor market has remained extremely tight, with the unemployment rate near a 50-year low, job vacancies near historical highs and wage growth elevated. Job gains have been robust, with employee — employment rising by an average of 378,000 jobs per month over the last three months. The labor market continues to be out of balance, with demand for workers substantially exceeding the supply of available workers. The labor force participation rate showed a welcome uptick in August, but is little-changed since the beginning of the year.

Next is a part where the kids might say that Powell said the quiet part out loud:

You know, we’re never going to say that there are too many people working but the real point is this: Inflation – what we hear from people when we meet with them is that – that they really are suffering from inflation. And if we want to set ourselves up, really, really light the way to another period of a very strong labor market, we have got to get inflation behind us.

Finally, in response to a question of Edward Lawrence of Fox Business about how long Americans should be expected to feel pain, Powell basically said it all starts with wages:

How long? It really depends on how long it takes for wages, and more than that, prices to come down for inflation to come down.

It’s always been the case that monetary policy mainly works by cooling demand, which means a trajectory of lower wages and fewer jobs. But now is making it crystal clear that the path to fighting inflation starts by hurting labor. If somehow inflation cools on its own, without a significant rise in the unemployment rate, well, that would be lucky. But it’s definitely not the plan.



Stocks We Are Watching 



SPY again remains our man focus as we watch how the markets respond for the remainder of the week to the Fed tightening monetary policy comments and another 75 point rate hike. We will be looking to hedge our open exposure to the markets right now but will be cautious. We expect to see more downside pressure for the remainder of the week but anything can happen as these are in a sense uncharted waters.