Powell and his team raised rates by 0.75 bps in an attempt to continue the fight against inflation.
He even said, “Another unusually large rate hike may appropriate, it depends on the data.
However, the market heard something different.
Of course, we rebounded before the FOMC and continued to rebound afterwards.
The market hears at this point that Powell did not go to 1.00 BPS and is therefore more concerned about the economy than inflation.
In other words, no worries about recession but then again, no worries about inflation either.
So what does our very sane, very elderly grandfather and grandmother have to say?
The Russell 2000 IWM closed up 2.25%. Retail or XRT closed up 2.52%.
On the chart, IWM encountered resistance while remaining above the 200-week moving average. Could IWM increase further?
Yes, if first, junk bonds remain in risk mode. Second, if IWM can hold above 180. Third, if IWM can close the week above 183.30.
And finally, if the huge drop in 20-plus-year bonds doesn’t ultimately make this day a one-day wonder.
Granny Retail has bigger problems. First, on the chart, XRT is below the 50-DMA and in a bearish phase. Second, XRT is barely above the 200-WMA at 60.90.
And finally, if the Fed is seen as unable to raise hard rates and control inflation, the consumer will continue to feel the pinch of higher prices on real goods.
Of course, growth stocks benefit from a rise.
How many times have we seen growth stocks outperform only to look back and realize that Granny and Grandpa don’t follow happiness?
We need real growth, not growth based on a $52 billion increase in the US semiconductor industry.
So we need to see XRT and IWM stay in the game. Perhaps the rise in durable goods orders and wholesale inventories defies recession fears.
Maybe, but if IWM and XRT can’t climb from here, it will be because:
Analysis and summary of ETF trading:
S&P 500 (SPY) 403 high strength
Russell 2000 (IWM) 182.50-183.50 stitches to clear 180 to hold
Dow Jones Industrials (DIA) 322-323 resistance 316 support
Nasdaq (QQQ) 308 large strength 293 support key
KRE (Regional banks) 60 key support performance
SMH (Semiconductors) 230 now essential
IYT (Transportation) Back on the 50-DMA should now hold
IBB (Biotechnology) support 120 resistance 129
XRT (retail) Has work to do – start by getting back to the 50-DMA
The author may have a position in the titles mentioned at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.