US stocks on the verge of a short-term capitulation?
A lot is riding on Fed chair Powell's speech today and whether or not he will offer any pushback to recent developments in the bond market. I'll outline those risks in a separate post later today but looking over to US equities, the charts tell more of the story here.
As much as investors will be hoping for Powell to offer some kind of pushback against higher yields, he may very well stick to the recent Fed messaging that higher yields generally reflect increased optimism in the economy.
But at some point, you would expect Powell & co. to move away from that message if it threatens their credibility in a considerable manner.
If that is not perceived to be today, then equities may be in for more pain this month.
The S&P 500 is closing in on a key trendline support stretching to March last year while the Nasdaq closed below a similar level yesterday:
If the technicals are anything to go by, Powell's lack of pushback against higher yields today may send selling into overdrive and this correction could really get ugly.
