S&P/ASX 200 (ASX:XJO) - XJO - Bear Posts only (Factors which might cause the markets to fall), 69999590, page-12230 - HotCopper | ASX Share Prices, Stock Market & Share Trading Forum

Originally posted by kacy ↑

"The uptrends have broken. RSI and MACD are heading lower on daily and weekly. The tendency is for down . . . "

If you ask me the fed has scared the hell out of the market. Powell mentioned the "R" word multiple times and has obviously given up on a soft landing.

"Jerome Powell said on Wednesday that while he has always believed that a so-called soft landing was a “plausible outcome,” for the economy, it isn’t guaranteed and that he wasn’t willing to give up on bringing down inflation to achieve it."

Now take a look at how much the CPI jumped up in August and think about how much oil (petrol) went up this month?

And there is no chance of oil coming down with OPEC+ restricting supply - and deliberately putting the wrecking ball to the US economy.

Powell warned that what happens next may be affected by factors outside the central bank’s control that could cause unemployment to rise more than anticipated.

“A soft landing is a primary objective,” Powell said, “That's what we've been trying to achieve for all this time.” But Powell noted that the absolutely worst thing the Fed can do is to fail to restore price stability.

“The record is clear on that—if you don't restore price stability, inflation comes back,” he said. It would be “miserable” to have inflation constantly coming back and the Fed needing to tighten rates again and again. “So the best thing we can do for everyone, we believe, is to restore price stability,” Powell said.

Which means they are going keep rates high until prices come down and the fed's target is reached regardless of what happens to the economy.

Question: So, why didn't the fed simply put rates up by 25 bps on Wednesday to cool inflation and explain why?

Answer: Because many banks are in bad shape and another rate hike would push them over the cliff. In other words, the fed's main inflation lever is broken. But he has another lever, it's called the stock market.

The charts below show that recessions are always preceded by negative yield inversions (yellow highlights) and markets always crash at the start of a recession.

https://www.seeitmarket.com/u-s-economy-soft-landing-or-recession-this-year/

https://www.barrons.com/livecoverage/fed-september-meeting-rate-decision-powell-speech-today

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Which means they are going keep rates high until prices come down and the fed's target is reached regardless of what happens to the economy.

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Dont forget whilst the Fed may have a long pause now, they are still indirectly tightening by shrinking the balance sheet by $90B a month, So whilst Powell's hand is off the interest rate lever, hes still whittling the balance sheet away in the backgound.

Originally posted by kacy ↑

Here is another good chart from twitter (opps, I mean X). It shows that on average markets peak 6 months before the recession starts, then drop by a further 30% and bottom 12 months after the recession start date.

The start date of the recession is decided by the National Bureau of Economic Research (NBER) and this decision is made 9-12mths after the recession has started. So if Q4 is the first negative GDP quarter, the start date of the recession (and 30% market crash) would be 1 October. BTY, The Bank Panic of 1907, the Stock Market Crash of 1929, and Black Monday 1987 all happened during the month of October. I wonder what they will call this one?

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So that would mean -ve GDP in Q4 23 and Q1 24. Aahan Menon from Prometheus Macro confirms this by also predicting a receesion start in March 2024.

Also if you listen to the first 5 mins, you hear why "net interest expense" hasnt risen much and thus slowed the path to recession, but those loans will have to be eventually refinanced to a higher rate. Pretty good economist although quite dry.

So yeah, being defensively positioned right now before the end of September sounds like a good strategy. Of course, you could throw out all the advice from these learned gentlemen and ladies who run their funds, and take advice from Superdufus and his spreadsheets that claim all is good, and go long on VGS and CSL......

the market finished in the green, and those of us who bought at the session lows for the obvious swing trade made a small fortune.

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Yes folks, Hindsight Harry trading, where you too can be a winner after the "obvious" fact. A few like that on the bull forum I hear.