Market Notebook
Discussion –
PRICE ACTION:
Equity prices, as measured by ticker SPY, and bond prices, as measured by ticker BND, closed lower on the week.
TECHNICAL ANALYSIS:
Equity price action was weak, closing towards the bottom of the consolidation range established around June 14th. Equities might be considered in consolidation if prices continue to close above the June 14th lows.
Bond prices have retested the June 14th lows and closed below the closing price of June 14th. While this is a technical breach of the lows, the bottom of the consolidation range is better thought of as an area versus a specific price. The price action next week will be important in establishing whether bonds are considered to be in a new downward trend or whether the general consolidation range will hold.
SENTIMENT:
Market participant sentiment towards both equities and bonds was negative last week. News flow appeared to spur pessimism. Market participants are realizing that many companies will have to transition through a rough earnings period before the situation improves. To a certain extent, prices already reflect this. Even though sentiment is poor, some instruments might be excellent long-term investments if purchased at current prices. This is not to say that prices can’t go lower; it is simply that opportunities do exist.
ECONOMY AND FUNDAMENTALS:
Regarding the real economy, the status quo continues. Significant inflationary pressures remain in the real economy, and the Federal Reserve continues to act to reign in those pressures. The Federal Reserve has been very active in communicating a hawkish intent. They appear determined to arrest inflation even at the cost of spurring a recession.
NEXT WEEK:
During the coming week and primarily based on technical analysis, the doors remain open for equity and bond purchases within portfolios should purchases be required. Caution is advised regarding purchases as equities and bonds are at or near important technical lows.
All the best during the week ahead!
Disclaimer: Nothing in this discussion should be considered investment advice. The content of this discussion is strictly my personal opinion and subject to change at a moment’s notice. Investment advice can only be provided to you by your investment professional and not by a general market discussion such as this one. If you wish to speak with an investment advisor, contact us. We can probably help.