Market Theme – Feast and Famine

July 25, 2022

Traders will feast the next two weeks and then the action will dry up

PRE-OPEN MARKET COMMENTS MONDAY – Feast and famine is the theme for the next few weeks. This week we have the FOMC statement and key earnings releases. Next week earnings season will climax and we will get key economic data points. After the first week in August, the volume will dry up and we will go into a news vacuum. If any market move is NOT accompanied with heavy volume, I would not trust it.

The Fed is expected to hike 75 basis points this week. The expectation is for 50 basis points in September when they return from recess and 25 basis points for the final two meetings of the year. That is an aggressive 175 points for the back half of the year. The effect of the previous rate hikes will take a few months to cycle through the economy.

Last week the ECB hiked rates 50 basis points and that was more than expected. The rhetoric has been hawkish.

Earnings season will ramp up. GOOGL and MSFT will report after the close Tuesday. META will report on Wednesday and AAPL and AMZN will report Thursday. After the report from SNAP last week, there are some concerns about social media advertising and that could impact GOOGL and META. The guidance provided by these tech giants will be critically important and most have announced reductions in head count recently.

This morning China announced a $55 billion bailout for property developers. That is a step in the right direction, but it is a far cry from the support that might be needed. China’s market finished lower and the reaction suggests that investors were not impressed. There are problems brewing in China. Rural banks not allowing depositors to withdraw funds and people with new construction mortgages are refusing to pay even if it means tainting their “social credit”.

I still believe that longer term swing traders should patiently wait for clarity. That could take a couple of months.

Day traders should look for decent volume and movement today. Overseas markets were mixed with Asia down and European markets up. This is a relatively flat open. Wait for market direction to be established. After today, the action is going to come to a crawl and we will be “dead till the Fed”.

Support is at $392 and resistance is at $400.


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