Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Opening Bell: U.S. Futures Slip As Bulls Draw Breath Ahead Of GDP Data

By Pinchas Cohen/Investing.comMarket OverviewJul 28, 2022 07:04AM ET
www.investing.com/analysis/opening-bell-us-futures-slip-as-bulls-draw-breath-ahead-of-gdp-data-200627749
Opening Bell: U.S. Futures Slip As Bulls Draw Breath Ahead Of GDP Data
By Pinchas Cohen/Investing.com   |  Jul 28, 2022 07:04AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
  • Futures slide suggests bulls bit off more than they can chew
  • Odds are against Fed's ability to lower inflation without recession
  • Dollar drops

European stocks opened higher on Thursday in an attempt to catch up with yesterday's exuberant Wall Street rally after comments from the US Federal Reserve Chair Jerome Powell suggested the central bank will temper its pace of tightening from here on out.

However, US futures on the Dow, S&P, NASDAQ, and Russell 2000 ran out of steam and were trading in the red today led by NASDAQ 100 contracts. The NASDAQ led yesterday's rally in the US market and closed twice as high as the Dow and about 1.5% higher than the S&P 500.

So, what's going on? I was taken aback by the market's risk-on reaction. After all, the Fed is hiking interest rates at the fastest pace in a generation. Furthermore, Powell put another jumbo increase on the table. However, yesterday traders preferred to focus on the Fed boss's comments that hikes will slow down, eventually.

However, traders may be focusing on what they want to hear. Powell himself said in June that policymakers expect to raise rates to roughly 3.4% this year and 3.8% by the end of 2023. These official Fed projections are above current market expectations. Why? I am not sure.

Traders will be keenly watching today's US GDP data in the hope that it shows that the economy did not post two consecutive quarters of negative growth which is an established indicator of a recession.

Furthermore, bulls seemed to have forgotten about the inverted yield curve yesterday, which is a leading indicator of a recession.

10-2 year Treasury Yield Daily
10-2 year Treasury Yield Daily

The inversion steepened, with the 2-year yield rising about 32 basis points higher than the 10-year, which declined after the rate announcement.

The yield curve was already at a multi-decade low earlier in the day but hit a new one after the policy release.

The 10-year yield is down for the fourth straight day for the first time in two and a half months.

10-year Treasuries Daily
10-year Treasuries Daily

Rates are below the neckline of an H&S top. If the price closes at this level, up to 2.8%, it will have completed the H&S top.

Powell repeatedly said that the US economy needs to slow down in order to bring down inflation. However, he also said that policymakers didn't think that a recession was a foregone conclusion. In other words, Powell is expressing confidence in being able to "thread the needle" and manage to navigate between soaring inflation and a recession. But remember this is the same Fed that either didn't identify or refused to acknowledge the problem of rising inflation, insisting it was "transitory."

Meanwhile, European shares hit a 7-week high, with solid earnings, including quarterly profits for Shell (LON:RDSa), reinforcing overall optimism. However, the STOXX 600 Index is showing signs of weakness.

STOXX 600 Daily
STOXX 600 Daily

The pan-European benchmark retreated from session highs, forming a shooting star (bearish on a closing basis) distancing from the downtrend line from the index's all-time high.

Most of Asia's stocks took a cue from yesterday's US session, while investors are awaiting news on a call between US President Joseph Biden and his Chinese counterpart, Xi Jinping.

The dollar opened lower, extending yesterday's 0.73% drop, the steepest since the 1.45% selloff on June 16. The lack of forward guidance appeared to bulls as less hawkish. Technically, I expect demand for the greenback to rise.

Dollar Index Daily
Dollar Index Daily

The dollar may develop a Falling Flag, bullish after the preceding 5.42% jump in nearly a straight line. The DXY has been ranging for eight sessions as the currency neared the June 15 highs. Also, the rising trendline is nearing.

Gold opened higher, soaring amid a weakening dollar. I also expect the yellow metal to go higher after completing a bullish pattern.

Gold Daily
Gold Daily

The price completed an H&S bottom. Although the range's size does not imply a distant target, the fact that it developed on the lows since June 2020 may increase a rally's momentum. The H&S's implied target is $1,775, coinciding with the channel top.

After yesterday's surge, Bitcoin slowed its advance to a standstill.

Bitcoin Daily
Bitcoin Daily

The cryptocurrency may be slowing down, having reached the top of its short-time rising channel.

Oil advanced for the second day on improving risk appetite, compounded by low inventories and Russia's cuts in gas exports. Technically, I remain bearish.

Oil Daily
Oil Daily

The current rally is nothing more than a return move to test the Symmetrical Triangle after the price found support by lows on Feb. 28. If the Symmetrical Triangle endures, the price will also complete a Descending Triangle, with an implied target of $56.

Up Ahead

  • Eurozone CPI is published on Friday.
  • US PCE Price Index is printed on Friday.
  • On Friday, Canadian GDP figures are released.

Disclaimer: The author currently does not own any of the securities mentioned in this article.

Opening Bell: U.S. Futures Slip As Bulls Draw Breath Ahead Of GDP Data
 

Related Articles

Gary Gordon
Lies, Bigger Lies And Economic Data  By Gary Gordon - Aug 08, 2022 6

It was the worst of times; it was the best of times. On Friday, the Bureau of Labor Statistics (BLS) revealed that the country created more than 500,000 jobs in July. Equally...

Opening Bell: U.S. Futures Slip As Bulls Draw Breath Ahead Of GDP Data

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (16)
Bakhtiyar Heydarli
Bakhtiyar Heydarli Aug 03, 2022 1:06PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Hi Mr. Cohen, wanted to know your opinion. How far can go up NASDAQ 100 if this is a bear market rally? Would be interesting to see your article about this topic.
patricio Silva
patricio Silva Jul 29, 2022 8:09PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Another day another error
António Carlos Galhano
António Carlos Galhano Jul 28, 2022 3:44PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
wti 56?! maybe 3 years from now. Idon't know how you get that informativo. wti Will not go down than 90$ on the next 3 months.
Pinchas Cohen
Pinchas Cohen Jul 28, 2022 3:44PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I suggest you re-read my article, carfully. I did not say WTI will get to $56. I said that's the pattern's "implied target," and how I "get that information" is by measuring the height of the pattern, from the point of breakout. Breakouts tend to repeat the price and duration of the preceding patterns, as the same interest unwinds.
Mohd Izhar Muslim
Mohd Izhar Muslim Jul 28, 2022 12:16PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thank you for sharing the article 💯
Pinchas Cohen
Pinchas Cohen Jul 28, 2022 12:16PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
You got it, Mohd
Elvio Chilelli
Elvio Chilelli Jul 28, 2022 11:11AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
There are no clear values growing right now. Everything down : stocks, bond, cryptos... even gold and real estate. So people, even if economy is crumbling, are still investing in stocks...  It may change during the summer
Pinchas Cohen
Pinchas Cohen Jul 28, 2022 11:11AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Investors are forward looking.
G D
G D Jul 28, 2022 9:13AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The markets will have a devastating reality check when they realize they actually depend on middle class people spending their salaries on their products to turn a profit.Or they'll just lay off everyone and pocket the bonuses all the same
Pinchas Cohen
Pinchas Cohen Jul 28, 2022 9:13AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
They will, unless the Fed will miraculously tame inflation without causing a recession.
irfan ameer
irfan ameer Jul 28, 2022 8:59AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
GDP comes negatively, so as per definition, we are in a recession, but markets seem happy about it as they are guessing the slowdown in the rate hikes. It seems to me a pool of fools. What is your take on that?
irfan ameer
irfan ameer Jul 28, 2022 8:59AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
BTW solid analysis. Keep up the good work. :)
Pinchas Cohen
Pinchas Cohen Jul 28, 2022 8:59AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I agree, but I am no prophet.
Jeremy Johnson
Jeremy Johnson Jul 28, 2022 8:57AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
It's ironic how crude rallies two days in a row after the fed rate hike, but the again, fuel and food isn't factored into the CPI.  Personally, I'm not convinced the Fed is anywhere close to taming inflation.
Pinchas Cohen
Pinchas Cohen Jul 28, 2022 8:57AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I agree.
Jack Peterson
Jack Peterson Jul 28, 2022 8:20AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
As always appreciate your solid daily updates… can’t help but think this excessive exuberance will have a horrible ending for many..
Pinchas Cohen
Pinchas Cohen Jul 28, 2022 8:20AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks, Jack. I agree. Happy trading!
Jimmy Rebello
Jimmy Rebello Jul 28, 2022 7:56AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
can market move according to amz and other major results day
Pinchas Cohen
Pinchas Cohen Jul 28, 2022 7:56AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Of course
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email