FOMC minutes passed
After unanimous rejection of a 75bp rate hike, the QT details were announced and mentions of MBS sales were made in the press conference, so even without reading the minutes one could anticipate there would be nothing substantial.
Since it’s already the weekend, it’s expected that the next two days will primarily move on rebalancing flows.
There isn’t a single catalyst driving the market.
In the late New York session, NVIDIA’s earnings will influence intraday moves, but there isn’t much else in terms of catalysts.
Whether the market goes up or down, it’s not a period to seek new material; it’s a time to consider portfolio adjustments and refrain from action if necessary.
● Equity market
The Dow’s resistance will essentially be viewed with these two lines as the main anchors.
Keeping a small alert ahead is sufficient; only act if it alerts.
There is no change in the forecast from the start of the week.
When scheduling posts, if NVIDIA’s unannounced earnings disappoints, risk-off could re-emerge.
● Forex market
Dollar/yen has technically reached a clean level.
If it moves above 127.5, we will observe until the start of next month, and within the month hold a short position with 127.5 as resistance.
Rates are trending lower, but there is also a bullish tilt driven by equities, so waiting for rebalancing to settle could be prudent.
Regarding rebalancing, there is nothing particularly specific to say; apart from expectations of more stock purchases as stock selling was stronger, there is little to predict.
Bond buying has been stronger than expected, so the dollar hasn’t strengthened much and is moving at a subdued pace.
If there is nothing of note, markets will likely move to the new week, but since Monday is a US holiday, there may be little activity on Monday as well.
There remains persistent selling pressure, indicators and the economy remain sensitive, and hence downside remains deep while upside is heavy.
However, if nothing material occurs, a gradual tilt toward higher equities can be expected.
US interest rates are in a range-bound, narrowing stance with low market momentum.
In the absence of a fundamental trend, positions tend to be driven by sentiment, making forecasts prone to both hits and misses and often ending in hindsight.
Keeping a fixed stance is not best; there are some guiding principles, but it’s not a place to place a big bet.
In short, the direction of movement is uncertain, but the rebalancing direction appears to involve only stock purchases.
However, given that the US is closed at the start of the week, this trend has been present since early this week, so how long it lasts is uncertain.
As I wrote yesterday, if rebalancing flows alone dominate, I would prefer not to chase higher prices from here and shift to selling into rallies.
