The central bank is more concerned with inflation than economic growth
PRE-OPEN MARKET COMMENTS THURSDAY – The ECB raised rates by 75 basis points this morning and the S&P 500 is giving back some of the gains from yesterday. This was on the high side of expectations and it signals that Europe is more concerned with inflation than an economic slowdown. The same can be said for the Fed and they will raise rates in two weeks.
European economic growth has been soft and the ECB has been very reluctant to hike. The Fed has raised rates by 225 basis points this year compared to 50 basis points for the ECB. Energy prices in Europe are going to jump higher now that Putin has threatened to turn off the Nord Stream 1 pipeline this winter.
China is suffering from major power outages (low hydro production because of the drought) and Xi will meet with Putin next week. I’m sure they will discuss diverting oil and natural gas from Europe to China.
The market does not go straight down or straight up. Yesterday’s rally was simply a short squeeze. The low volume and choppy price action indicates as much. This has the potential to be a nasty down day.
Swing traders should remain sidelined.
Day traders should look for stacked red candles on the open. That would signal a gap and go formation. 1OP is on a spike and I would be inclined to join this move. These candles need to stack nicely. No overlap and no dojis. I would prefer to wait for a small bounce so that I can evaluate the height and duration of the bounce. That will indicate how interested buyers are at this level.
Support is at $394.50 and $389. Resistance is at $400.