1. The Fed Hikes Rates — What Happens Next?
The Fed hiked rates for the first time in three years.
We also learned that the Fed thinks inflation isn’t cooling just yet, with the potential for another hike this year.
Prior to the announcement, yields were falling. Then, they turned around and closed at the day’s highs. Let’s see how the market reacts.
Keep in mind: initial reactions tend to be wrong a lot of the time. The real trend comes into play Thursday and Friday.
2. The S&P 500 Is Testing Key Support
Stocks sold off after the rate announcement.
The S&P 500 closed below its 50-day moving average. However, it’s retesting the moving average this morning.
We’re watching this moving average closely. The past four trading days have been around the 50-day moving average.
A move below it or a decent bounce above it could give hints on direction. Obviously, this is looking at the chart only.
3. Gold Keeps Defending $4,300
Gold around $4,000 got very choppy, but no matter what, that level was defended over and over again.
Gold around $4,300 is doing something very similar for now. It keeps getting defended. Are there buyers here? Is this a support level?
We are watching this closely.
$4,500 and then $4,700 are big resistance levels on the upside. Above that, $5,000 comes into play very quickly.
On the downside, $4,300 is acting as a strong floor. A move below could mean $4,000 very quickly.
4. Japan Could Send Shockwaves Through Markets
Tonight, the Bank of Japan is expected to raise its benchmark rate from 1% to 1.25%.
Sounds not that interesting, and there is very little coverage about it.
Can’t stress this enough: what’s happening in Japan could send shockwaves through the global financial system.
There’s a big carry trade at play. We also know Japan is trying to make sure the yen appreciates, and yields are already so high.
If there’s noise about an unwind of the carry trade, it’s going to cause a broad market sell-off.
5. Trade War Escalates, Bitcoin Holds & Canada Focus
The Canada-U.S. trade war is escalating. Keep in mind: noise creates more uncertainty.
Bitcoin continues to defend $76,000.
There is potentially a short-term breakout in the dollar index (DXY).
China is apparently telling Iran to calm the situation in Yemen. Oil dropped on this story.
We are thinking about setting up a Canada-focused section at Zulfiqar Research, given the demand for Canadian resources and the investments pouring in. We will keep you updated.