Welcome to this weekends, Wall StreetUnderground,Disclaimer:...

Welcome to this weekends, Wall StreetUnderground,

Disclaimer: This is a research letter I amproposing to write-up weekly or monthly provided I get enough time. These are my own views, opinions and do not constitute in any financial advice or investment advice. If any charts are presented, they are only based on my opinions not for any investment advice and hopefully upset anyone, they are purely sentiment based with data and wall street institutional chatter and economists’ opinions.

Kindly read and enjoy it, decipher it asyou like as there might be some codes for the groups can be pick up the clues,just to make it fun!!!
.

So, Good evening to all,

Now what did Powell go and do? Was this premeditated? But first please note the following FOMC members speaking dates and the next set of data to come for FOMC decision on the rates to come:

· FOMC Member Brainard speaks onTuesday 30 Aug 2022

· FOMC Member Williams Speaks on Wednesday 31 Aug 2022

· FOMC Member Mester Speaks on Wednesday 31 Aug 2022

US ADPNon-Farm Employment Change: on Wednesday 31 Aug 2022

Estimated change in the number of employedpeople during the previous month, excluding the farming industry and government.Job creation is an important leading indicator of consumer spending, whichaccounts for a majority of overall economic activity

US UnemploymentRate : on Friday 2 Sep 2022

Although it's generally viewed as a laggingindicator, the number of unemployed people is an important signal of overalleconomic health because consumer spending is highly correlated withlabor-market conditions. Unemployment is also a major consideration for FOMC.

So lets break the sentiment of Powell speechdown:

Short, sharp, focused and to the point. Wall Street are you hearing me !!!

Key lessons were presented like a nice piecewritten by someone from Yale…
.

So Powell states the follows:

"Restoring price stability will takesome time and requires using our tools forcefully to bring demand and supplyinto better balance. Reducing inflation is likely to require a sustained periodof below-trend growth. Moreover, there will very likely be some softening of labourmarket conditions,"

Now here is the KICKER and what upset theInstitutions !!!
.

"While higher interest rates, slowergrowth, and softer labour market conditions will bring down inflation, theywill also bring some pain to households and businesses. These are theunfortunate costs of reducing inflation. But a failure to restore pricestability would mean far greater pain," he added.
.

The ironic part is most Institutions werealready expecting Powell to be abit “undiluted” but the was the way he “SAID IT”,like no disregard to Wall Street. You have Big Boys on major HEAT during this time, Testosterone is HIGH HIGH HIGH, Egos are even higher. So when something like this happens in High School where the other side totally ‘blanks’ your team, you want to show you are in power!!! Typical US teenage, hot minded, hot blooded, only I exist in the world and that’s all that matters. So what do you get? … a knee jerk REATION and boy did we all get one? And to top it off the Fed so called “pivot” or “soft lading” aint happening Big Boys!!! So deal with it and in your face like a Pie out of the sky!
.

Reaction:? The sell-off on Wall Street was broad-based,

· The Dow Jones IndustrialAverage dropped 1,008.38 points, or 3.03%, to 32,283.40, with lossesaccelerating into the close.

· The S&P 500 fell 3.37% to4,057.66. with just five stocks in the S&P 500 posting gains on Friday.

· The Nasdaq Composite slid 3.94%to 12,141.71.

So now the Wall Street huddle occurs: buzzbuzz buzz what we thinking boys?

Now the belief is that the rates are goingto be higher for longer but hey… we’ve seen some repricing of the cuts in 2023. But now for the time being it’s likely to continue to fuel equity volatility from here.

So I ask… is this the 1^st timeever Inflation has happened?

The dark side of fulfilling your desires…. Welcometo Inflation

Federal Reserve officials have never been blindto inflation but had always been given a dual mandate that required monetarypolicy to be calibrated so that it delivered full employment and pricestability.
.

Huh??? How do you do both at the same time? One or the other right? So politics enters the room … What will get us more votes and keep us in power? Full Employment, yes give the “Joe Public” full employment and make the illusion they can get all the things they want, increase desire, increase wants and of course it always took preference over curtailing inflation.
.

In 1979, Paul Volcker, formerly the president of the Federal Reserve Bank of New York, became chairman of the Federal Reserve Board. When he took office in August, year-over-year inflation was running above 11 percent, and national joblessness was just under 6 percent.

The economy entered recession again in July1981, and this proved to be more severe and protracted, lasting until November1982. Unemployment peaked at nearly 11 percent, but inflation continued to movelower and by recession’s end, year-over-year inflation was back under 5percent. In time, as the Fed’s commitment to low inflation gained credibility,unemployment retreated, and the economy entered a period of sustained growthand stability. The Great Inflation was over.
.

Interestingly, Powell’s Yale speech writerborrowed Paul Volcker former president of the Fed reserve sentiments from 1979, where he said “the importance of time-consistent PRICE policy choices— PRICE policies that do not sacrifice longer-term prosperity for short-term gains”

So short term pain for long term gain… andthat is how Powell slapped Wall Street !!! Ouch , Toys out of the Wall Street Pram!!!
Institutions are going to start pricing in a potential .75 points rate.
.

The darkening economic outlook andlingering upside risks in relation to the interest rate path ahead are some ofthe possible reasons for why the Dollar's initial sell-off in the wake of Powell’sFriday's address was short-lived. Was interesting to see the slump of the dollar before the speech and then the recovery …. Very interesting as the FX market High Trading systems were programmed for the spike down and then recovery. This would have destroyed Retail FX traders with their stop losses but FX Institutional trading made a killing ! Sound familiar my dear Retail Traders and Retail Investors?
.

So Wall Street Chatter:

"The Fed is not yet ready to acknowledge that the inflationpicture is materially improving."

“Powell’s decision to reiterate the centralimportance of combatting inflation overgrowth does highlight the willingness tomaintain the upward trajectory for rates in the face of economic suffering."

"We still expect the Fed to raise keyinterest rates from the current 2.50% to as high as 4% by year-end. Powell'sstatements also signal that he supports a front-loading of rate hikes. Thesharp tightening of monetary policy, however, is likely to trigger a recessionnext year."

.

So now SYA outlook:

We aint going past $ .30 cents for now purely based on the US Macro sentiments unless "a few SYA Anns" drop but caution of quick sell downs. Thisis why the Institutions on Friday tested price out of the main upward Channel down to.275 cents. I believe there will be further tests down and I call them tests because Institutions are in accumulation mode before the ASX 200 potentially (as I provided in my previous post on Friday). Of course there are Shorters who will be selling back in who covered @ .30 cents. But September will have some interesting news which I am anticipating will create an upward price action. I must point out about analytical sentiment. The further your Price action moves away from the Median trend, you get pulled back to the Median eventually. So in an uptrend Median, even a little sneeze of an announcement bounces up and up.
.In an inflationary and recession uncertainty down tread good news spikes the SP up and immediately sells down ….
.
Why? due to human emotions of FEAR !!! So its true real Bull markets are born in the most pessimistic human mind set on a stock market. Human emotions is what Wall Street understands well and plays it again and again. In the early days it was creating Fear and Greed and Anxiety word of mouth by shouting down the street and Stock traders used to stand at the bottom of the street telling others to buy or sell manually passing pieces of paper. Now that same little street has its own Building NYSE and the sidewalk encompassing finance touters changed to Wall Street. Now everything has become electronic and creating even high speed computerised analytical decision trading by the Institutions.
.

If you have read this post so far I commendyou for doing so and hopefully did not put you to sleep. I really want to keep writing my Wall Street Underground and possibly create a forum for likeminded investment enthusiasts. Have not worked out media outlet as yet. But someday … dreams to dream.
.

I hope you all have a beautiful weekend.Its been raining here in Sydney but still got my rowing in, my meditation inand my earthing in. Oh… Earthing is where I sit on the grass for 1 hour early early morning bare feet. Its healed me tremendously. If you guys and girls are interested for a another research letter about history of US Inflation and FOMC and political shenanigans let me know.

Have an awesome weekend. Keep your spirits up, we know where SYA is headed in the long run. So be kind, be joyful, be encouraging to fellow SYA ers and fellow Lithium holders.
.
regards
OrdFin

Wall StreetUnderground