Powell Shake Up

Jerome Powell is not as careful as his predecessors.  Unlike some analysts, I believe he was intentionally trying to send a signal that the Fed will not be passive and will react to short term data.  I believe that will work both ways.  I don't know if it will be a good or bad thing, but I see Powell overreacting to short term economic data and the stock market.  He seems to have bought into the fiscal economic boom hype that is all the rage these days. 

It will be interesting to see if he overreacts when the short term data goes the other direction and suddenly stops rate hikes this year if we get a few months of bad data.   That is very possible because this over leveraged economy will be feeling the burden of higher rates this year.  Since he comes from the investment world, I am sure he will be quick to cut rates and provide accomodation if the market is going down enough to scare the crowd. 

The market is prone to overreact to the Fed's short term leans but with nonfarm payrolls and CPI and Powell's first FOMC meeting coming up over the next 3 weeks, it will be sell first, ask questions later.  I am a bit surprised they ran the market up ahead of Powell's testimony.  Didn't they learn their lesson from running the market up ahead of last week's Fed minutes?  It tells me that there are a lot of short sellers daytrading this market, as they seem to be the one squeezing the markets higher ahead of events and economic data.  They did the same thing ahead of CPI as well. 

But next month, after this big rally off the lows, gut feel tells me that they will be selling ahead of the events, not buying.  After all, the stock market doesn't like uncertainty, and suddenly the market is worried about economic data coming in too hot and the Fed's reactions.  This period will soon pass, but probably after some more volatility in the coming weeks.

This week's high near 2790 should be the top of this V bounce.  I could see one more move higher this week as the first of day equity inflows come in, but that will be the point to short.  I am eyeing a short either tomorrow or Friday, if it gets up to 2775-2780.  Could easily see a move to 2640-2680 in the next 2 weeks.