rate pause = recession incoming?👀📉

What’s going on traders.

We’re back with another market brief in the wake of yesterday’s FED rate pause.

We breakdown what this means for the markets in the days, weeks, and months ahead.

Let’s get into it…

Impact Snapshot

• U.S. jobless claims fall to 8-month low of 201,000 with businesses avoiding layoffs

• Home sales fall in August to the lowest level since January

Market Evaluation

Stocks fell, while Treasury 10-year yields rose alongside the dollar after the latest reading on the labor market reinforced the case for the Federal Reserve’s higher-for-longer stance.

The Federal Reserve held interest rates steady, while also indicating it still expects one more hike before the end of the year and fewer cuts than previously indicated next year.

Consumer spending remains strong and the labor market has been steady, though job growth is starting to moderate.

That strength bodes well for the Fed’s efforts to cool inflation without sending the economy into a recession, but it’s also raised concern at the central bank that the inflation fight could be prolonged.

We always mention the importance of looking at the bigger picture when it comes to the markets. 

Being able to identify key zones on Treasury yields, DXY and U.S. Dollar can play an important role in the context of the market’s health.

Yields going up further confirms a strong U.S. dollar outlook and with VIX approaching a pretty key zone of interest for a bounce on the upside can take a great toll on the stock markets.

We can use these type of correlations to identify strength or weakness in the markets.

Markets Breakdown

Yesterday’s emotional session was contained inside the Bearish scenario we’ve posted since the overnight. Read it here.

For any meaningful upside, bulls had to explore the prices above 4502 which they have failed to achieve thru out the session.

The RTH session opened with a gap to the upside which saw a rejection and the price started to range right bellow 4502 thru out the early session up until the FOMC release.

Sellers maintained their downward pressure as the emotional timing of FOMC release began to take place with aggressive sellers hitting the bid and pushing the market straight down to our key pivot of the session at 4502.

The pivot managed to stall the downside continuation as buyers took control to attempt a breakout through the key resistance zone at 4502.

Market reached an upside of 0.47% from the pivot where buying effort was completely negated and saw a re-test of the pivot and failure to hold which signaled continuation.

Price reached the final downside bottom target for the intraday session which was the 4443 level. 

Despite the “news” that were already baked in the price and the expected volatility, the bigger picture view for the short-term trading remained the same with the price action following the exact chain-reaction path we were looking. Read the update here.

Level by level.

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The closing strength of yesterday’s emotional session carried over as selling pressure continued thruout the Asia and Europe sessions. Markets oppened with a gap to the downside and landed on our levels of interest from the ON post.

The targets we look for until NY close & Targets to pay attention Tomorrow:

• Upside Levels: 4420/4443/4464

• Downside Levels: 4399/4382/4361

That wraps up today’s brief.

We’ll see you in Sunday’s big report.

-QuantVue Team

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