After this correction shortly completes, markets should recover to their all-time highs into the end of 2022. August – November appears to be a sustained move higher in the broad market, and while all major indexes should rally during this time, the Nasdaq should move most. A temporary bottom has likely formed last week – or can form tomorrow – and a bounce should occur into August. Depending how high the market gets, we will know whether 3,500 SPX can be tested in August. Multiple Fed members have come out against significantly more QT, and are of the opinion that the Fed’s work is nearly done. Should this shift in narrative take hold, a massive short squeeze could be seen in the major indexes. Powell speaks this Wednesday and Thursday, and has the potential to propel markets significantly higher with the right language.
From a technical perspective, the major indexes remain beneath each of their key daily moving averages. A clean break of each major index’s 200-daily moving average will confirm an end to the correction now unfolding in the market. The VIX also remains highly elevated at 31.00. This level is unsustainable, and the VIX will soon retrace down to its baseline at 20.00.
Last Week’s Economic Data:
Retail Sales: Miss
FOMC Interest Rate Decision: Neutral
Building Permits: Miss
Initial Jobless Claims: Miss
Philadelphia Fed Manufacturing Index: Miss
Upcoming Economic Data:
Tuesday: Existing Home Sales
Wednesday-Thursday: Powell Congressional Address
Thursday: Initial Jobless Claims