Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Stocks Rally Despite Hawkish FOMC Minutes

By Michael KramerStock MarketsNov 24, 2022 04:13AM ET
www.investing.com/analysis/stocks-rally-despite-hawkish-fomc-minutes-200632733
Stocks Rally Despite Hawkish FOMC Minutes
By Michael Kramer   |  Nov 24, 2022 04:13AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
US500
-0.73%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DJI
-0.90%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
CAT
-1.57%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DIA
-0.91%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
QQQ
-0.64%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
IBM
-0.49%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

Stocks finished the day higher yesterday, with the S&P 500 rising by about 60 bps. The Fed minutes were not dovish, not if you got the point of them, which was that the terminal rate would be higher than previously thought. The pace of the hike probably doesn’t matter much because if the Fed wants rates to be at 5%, that is likely where they will be in early 2023. A 50 basis points (bp) rate hike would get us 4.5% by December and another 50 bp by January. The question is whether the rate will continue to push higher from there and what that means for Treasury rates.

If the Fed is going to leave rates at 5% for the next year, then over time, I would think the 2-year rate would rise to around that level to reflect that expectation. Whether the Fed leaves rates at 5% for all of 2023 isn’t the question. The question is if the Fed can make the market believe it will.

The need is to keep financial conditions easing, and I suspect they are not ready to let that happen.

S&P 500

The S&P 500 closed at the highs seen on Nov. 15, and I don’t think that is enough to change anything at this point. It still looks like a corrective wave, which looks like a double-zigzag. That is hitting up against a 61.8% retracement of the August highs and a 78.6% extension of the October lows.

S&P 500 Daily Chart
S&P 500 Daily Chart

VVIX

Additionally, the VVIX had a big move higher yesterday for the second day in a row, and while two days in a row are not a trend, it is interesting as the VIX index declines.

VVIX Index Daily Chart
VVIX Index Daily Chart

VIX/VVIX

The VIX to VVIX ratio fell sharply yesterday and below its lower Bollinger band. This year, every time that happened, it coincided with the S&P 500 topping. It is an observation.

VIX/VVIX Daily Chart
VIX/VVIX Daily Chart

Additionally, the VIX spot minus the VIX 3-month generic futures contract fell to -5.1 yesterday. That also has been historically associated with market tops this year as well.

SKE

VIX Index Spread Daily Chart
VIX Index Spread Daily Chart

SKEW

Additionally, we saw the SKEW index pop higher, indicating that traders are suddenly looking for tail risk protection.

CBOE SKEW Index Daily Chart
CBOE SKEW Index Daily Chart

Again, these aren’t the makings of a market getting ready to move significantly higher. These remain markings of a market starting to position itself for higher volatility. Will any of these observations call the exact moment of a top no? But they can tell us what is happening beneath the surface and what traders think about and do. After all, the market likes to think about the second-derivative trade, and the second derivative of selling volatility is buying volatility. Plus, this is a holiday week, and the de facto trade into a holiday is to sell volatility as time value decays.

IBM

International Business Machines (NYSE:IBM) finished the day lower yesterday, one of the stocks that helped push the Dow’s outperformance and remains worth watching. The stock rose yesterday to the highest level price since February 2020. It is kind of ironic, in a way. As most stocks fall to their February 2020 levels, IBM is still recovering from the Covid sell-off.

IBM Daily Chart
IBM Daily Chart

Caterpillar

Caterpillar (NYSE:CAT) also seems interesting, as its RSI is trending lower and has formed what could be a short-term double top. The stock hit resistance again yesterday at its April highs. Furthermore, it is not so much to figure out where this is going, but what signals it is sending.

Caterpillar Inc, Daily Chart
Caterpillar Inc, Daily Chart

QQQ to DIA

What is interesting is when you do a ratio of the QQQ to DIA. It is evident when looking at this ratio that money is exiting the higher-growth parts of the market and going back into the more traditional parts. The parts of the market were left behind over the past two years. Of course, the question is where it stops and if this is just a return to the longer-term trend line.

Otherwise, this may be some proxy trade on bond yields. Not sure.

QQQ/DIA Daily Chart
QQQ/DIA Daily Chart

Original Post

Stocks Rally Despite Hawkish FOMC Minutes
 

Related Articles

Stocks Rally Despite Hawkish FOMC Minutes

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 (7)
W W
W W Nov 25, 2022 8:08AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Apparently the markets heard dovish tones!
Dima Yush
Dima Yush Nov 24, 2022 10:50AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
michael great analysis of the minutes and market stance...i made some notes for myself and will definitely follow your posts and
Sina Mohseni
Sina Mohseni Nov 24, 2022 10:33AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
we have at least a year to see the end of this contraction cycle. i.e. to see a growing economy again. I'll wait and by the bottom just before Q3 2023
jason xx
jason xx Nov 24, 2022 10:33AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Wrong... GDP was positive last quarter and will be again. Thats growth no matter how you slice it.
Michael Song
Michael Song Nov 24, 2022 10:16AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
sorry but you missed or didnt get the minutes well..it says slow increases..true that they dont give the hint that they will stop but they say say slow increases..this means they see clear results and slow and next time this can mean full stop and pivot or we are close to pivot.  therefore entire market got this right message but not you:)
JIM VETTER
JIM VETTER Nov 24, 2022 10:16AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
lol... we'll see what you have to say in 2023 when the big rug pull happens
Jp Perth
Jp Perth Nov 24, 2022 10:16AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
yes herd if sheep got it. Buying equities at the start of a recession is probably the single dumbest thing anyone could do.
jason xx
jason xx Nov 24, 2022 10:16AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
JIM VETTER Can't wait for the buying opp. We always recover. The market truly is to big to fail.
Mario tragik
Mario tragik Nov 24, 2022 8:29AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
lol kramer just stop man. its kind of sad watching you still pushing the bear narrative. if people followed your advice they would be in ruins by now.
Kris Jay
Kris Jay Nov 24, 2022 8:29AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
what is you purpose here?  If you dont like Kramer's analysis then just dont read it.  you're like some prude complaining about a rique TV show.    You offer nothing to the community in terms of a counter analysis, it seems your purpose is just to insult someone.  Take it to another board.
Kris Jay
Kris Jay Nov 24, 2022 8:29AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
blocked
Ross Dre
Ross Dre Nov 24, 2022 8:29AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Kris Jay with the gospel. Thank you. I’ll keep Mario unblocked however.
Michael Song
Michael Song Nov 24, 2022 8:29AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Kris Jay  of course we read his analysis and if we think the opposite way we tell it openly..there is no insult in this..but you can block everyone who thinks different than you..no problem..
Djamshid Bakiev
AMMM Nov 24, 2022 8:29AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
technically speaking there is nothing wrong with author's arguments. I'm long for now, but started to hedge, as tactically it is just another normal and healthy squeeze. Trend will change only if FED is out of the play.
Jeff Page
Jeff Page Nov 24, 2022 7:56AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
A terminal rate of 5% will not get us above PCE. I do believe there will be a pause after January also. Do you have any charts showing momentum shifts with VIX/VVIX? Thank you for your work! Happy Thanksgiving.
Kris Jay
Kris Jay Nov 24, 2022 7:56AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
5% just seems like a normal Fed funds rate looking over time.  maybe a little on the higher side but still in the ballpark.  economy has not slowed much, still giving away free money, housing starts increased, wages still increasing only a small 20K or so increase in job losses.
jason xx
jason xx Nov 24, 2022 7:04AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Notice how you are the only one saying the FED minutes were hawkish?
Shaheen Hays
Shaheen Hays Nov 24, 2022 7:04AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I agree with him, raising rates higher is not dovish like everbody is saying. We will have a fed rate of 5.5-6% and keep it there which will make a big diference to what people are thinking now
Tomas No
Tomas No Nov 24, 2022 7:04AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
They were dovy-semi-hawkish ;P
Mario tragik
Mario tragik Nov 24, 2022 7:04AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
people will interpret what they want depending on their bias. the market does not care what your bias is.
Kris Jay
Kris Jay Nov 24, 2022 7:04AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
notice the Fed governor's hawkish speech today which had markets down?   dont listen to Mary Daly, she is not even a voting member.
 
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