Technical Analysis

Hawkish Powell continues to weigh on equities outlook

US stocks suffered a major dip yesterday after Powell’s press conference reaffirmed that the Fed is not wavering in their resolve to fight the inflation battle. That will continue to keep the narrative that the path of least resistance still seems for a move lower, and the technicals are also siding with that view for the most part.

The recovery in the past two weeks ran into key resistance from the 100-day moving average (red line) and a more hawkish Fed yesterday cements the defense by sellers this week. In turn, it also continues to validate the pattern of lower highs, lower lows – which has been persisting since the turn of the year and noted previously here.

In other words, the bearish trend is still very much intact and the Fed’s latest communique does not change the outlook whatsoever.

It will now come down to economic data to really dictate if there is reason for the Fed to slowly shift towards a slower pace of rate hikes but unless we do see inflation numbers fall significantly in the months ahead, equities are likely to be in for a rough time still.

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