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Don't look to the Fed to explain today's torrid, global rally: according to a controversial take by BMO's bearish technical analyst, Russ Visch, yesterday’s FOMC announcement was a non-event "as markets shrugged off the interest rate decision and follow-up presser with Chairman Powell", and today's action has an entirely different catalyst, resulting in "no change" to Visch's short-term outlook.
And in another contrarian take, Visch claims that "the quality of the rally since late May (narrow participation, extremely light volume) suggest it’s nothing more than a relief rally within an ongoing medium-term downtrend" as shown in the chart below.
Fed - Today - Buying - Panic - S
So if not the Fed, what is behind today's buying panic which sent the S&P to new all time highs? As Visch writes, "we are inclined to believe it has more to do with tomorrow’s quadruple expiry in futures and options markets than a true shift in investor sentiment." His conclusion:
As of today, the major averages are very near to overhead resistance levels while at the same time short-term momentum gauges are now at/near overbought extremes, all of which suggests upside is likely limited from here.
Whether - Visch - Market - Liquidity - Reversals
Whether or not Visch is right may be secondary to the technical is in the market which, due to shrinking liquidity has become especially sensitive to reversals and headline risk: indeed, as Bloomberg writes, "a minor technical adjustment could spark a big upside move when liquidity is thin." such as right now, when according to Goldman the top-of-depth for the S&P is weaker than it is in low-vol periods despite the record high...
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