By: Jeff Cooper

Hit and Run Morning Stock Report: December 1, 2022

A Market Hears What It Wants To Hear

“Wage growth remains well above levels that would be consistent with 2% inflation.” Jerome Powell, November 30th, 2022.

“We have a long way to go in restoring price stability.” Jerome Powell, November 30th, 2022.

“Inflation has mostly ‘moved stubbornly sideways’ over the course of this year.” Jerome Powell, November 30th, 2022

“For the near term, a moderation of labor demand growth will be required to restore balance to the labor market.” Jerome Powell, November 30th, 2022

“A man hears what he wants to hear and disregards the rest.” Simon and Garfunkel, The Boxer

Translation: With the inflation rate as measured by the CPI and the PPI remaining 4 times higher than the Fed’s maximum target rate of 2%, with little progress shown in spite of the most aggressive rise in interest rates in over 40 years, it will be necessary to continue to raise interest rates far longer than originally expected, and until unemployment is so high that worker wages will drop sharply.

Yes, but, first, the Algomatics slobber all over themselves because Jerry doesn’t want to be known as a complete Grinch.

Talk about double-talk.

There was nothing new in what Powell said. The Street expected a 50 basis point rate hike in December.

And Powell blessed that notion.

The Algo’s jumped all over it because that’s what they do…just like the CPI recently.

It would have been one thing if the above quotes had been said at different dates over the last month, but they were all in Powell’s speech yesterday.

And why the speech yesterday with a Fed meeting set for December 14th?

The rumor is that Powell asked for the venue.

Is it real or Memorex?

If you recall last week we pointed to an SPX square-out at 4075-4085.

Those numbers are 180 degrees straight across and opposite October 13th…the low for 2022.

I thought the SPX had missed its opportunity to achieve that level with the recent pullback, but Powell’s Triangle Pendulum played out.

Did you notice that the market exploded before Powell said a word. That smacks of deep pockets buying intervention on Wednesday.

I thought there was a strong likelihood that the SPX would fully kiss the 3900-3910 region before there was a rally attempt.

This is the trend line shown in yesterday’s report.

In sum, yesterday’s rally satisfied the above 4080 square-out.

Additionally, the SPX spiked to a declining trend line connecting the late March and mid-August highs.

What does it do for an encore?

Cycles suggest the first half of December is down with the likelihood of a rally the last two weeks of the month. We’ll walk through this in tomorrow’s report.