As markets still feel the pain after last week’s worst sell off since 2020, more volatility is ahead. As a technical analyst, many charts which will determine where stocks go are either at major support or at resistance. Hopeful for a turnaround but that will depend on the fundamental catalyst.
It is a major central bank week. It kicked off with the People’s Bank of China (PBoC) who have lowered the borrowing cost of 14 day reverse repos and stepped up cash injections. 2 billion yuan ($286.54 million) has been injected through 7-day reverse repos and another 10 billion yuan through the 14-day tenor. The higher cash injection is to “maintain liquidity level stable at end of the quarter”. With no reverse repo maturing on Monday, the PBOC injected a net 12 billion yuan via the short-term liquidity instruments.
While the PBoC is dovish and doing easing, major western central banks are on the opposite scale. Hawkish and tightening. Circle Wednesday on your calendar folks, it is going to be a big day. The Federal Reserve takes centre stage with the Fed expected to raise rates by 75 basis points, going from 2.50% to 3.25%. This is priced in. What will move markets is the Fed’s forward guidance. Powell’s press conference will give us an insight to how hawkish and aggressive the Fed will be. If we hear anything hinting towards larger rate hikes coming, expect markets to drop and bond yields to jump.
But that isn’t all. We also have the Bank of England, the Swiss National Bank, the Bank of Japan and the Norwegian Norges Bank. The Swiss are expected to return to positive territory. The market expects a 75 basis point hike taking rates from -0.25% to 0.5%. The Bank of England is expected to raise rates 50 basis points from 1.75% to 2.25%. Norway is expected to hike 50 basis points going from 1.75% to 2.25% their highest since 2011. Nothing is expected from the Bank of Japan who have kept rates at -0.1%. With other central banks raising rates and perhaps hinting at further hikes, the Japanese Yen would be expected to continue to weaken.
I will be watching the US Dollar and the 10 year yield on the day of the Fed decision. If the dollar spikes higher and if the 10 year yield breaks above 3.50%, then expect the markets to drop further and test the June lows.
News
Homebuilder sentiment in the US fell in September making it the ninth straight month of negative sentiment. Nearly a quarter of builders reported lowering prices.
President Biden says US forces would defend Taiwan in the event of a Chinese invasion.
More earnings disasters (and warnings!) like FedEx could be coming.
The EU may freeze Hungary Euros amid corruption fears.
Heavy rain may damage Ivory Coast main cocoa crop. Just another example of an unpredictable climate hitting food. Ivory Coast is the world’s top cocoa producer.
Canadian Market News
Gama Explorations Inc (GAMA.CN) has entered into a definitive agreement to acquire Tyee Nickel Corp. The stock is currently up over 164% with over 97,000 shares traded.
BYND Cannasoft Enterprises Inc (BYND.CN) signs an agreement for the acquisition of Zigi Carmel Initiatives & Investments in a share swap agreement valued at US $28 Million. The stock is currently up over 127% with over 134,000 shares traded.
Cypress Developments (CYP.V) confirmed the production of battery grade lithium carbonate. The stock is up 25% with over 420,000 shares traded.
Callinex Mines (CNX.V) intersects 33.67 metres of 4.29% Copper and other high-grade intervals at the Rainbow deposit located in the Flin Flon Mining district. The stock is up over 13% with just over 20,000 shares traded.
Kinross Gold (K.TO) to buy back $300 million shares following talks with Elliott Investment Management. The stock is up over 9% with over 2.7 million shares traded.
Chart of the Day
Bitcoin and many other cryptos are battling at major support. Bitcoin has bounced off this support zone multiple times in the past as you can see from the chart. Is a fifth time possible? The test comes just a few days before the Federal Reserve rate decision. A dovish Fed could see a new uptrend begin from here. A hawkish Fed could see risk on assets sell off hard including Bitcoin, clearing the path towards $12,000.
