Daily Alert – Wednesday 18th May 2022: Powell kills positive sentiment

Mark NugentDaily Alert, May 2022

Daily Alert – Wednesday 18th May 2022: Powell kills positive sentiment

Good morning.

Yesterday was a good, solid risk-on day with all the elements of our calculator pointing in the same direction. I entered S&P500 long via a pending order and it moved up nicely during the day closing in the money. Then along wandered Fed Chair Powell, said the kind of thing central bankers say, something like “we’ll do what we need to do to curb inflation” and the markets saw this as hawkish, instead of well-he-would-say-that-wouldn’t-he. I mean consider the alternative: “we’re not going to do what we need to do to curb inflation, we’re going to spend more time at the pool bar.”

Anyway, this has caused the equity rise to halt and the other sentiment indicators are now all in perfect agreement that we are risk-off. Still, maybe it’s just a pause. It doesn’t look like a reversal.

Elsewhere, inflation in the UK hit a 40-year high at 9 percent. The Bank of England looks boxed-in as there is little they believe they can do in terms of additional rate hikes without crushing the economy. The GBP slides. I think it may be time to formally go bearish on the pound.

We’ll be back tomorrow.

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