Yesterday marked a 7th new session low in the E-mini S&P 500 without a three session pause since the doji high of July 24.
Attempted recoveries have been short-lived in the last week’s trade, since the heavy sell-off last Thursday. That 40 point decline last Thursday is a dominant candle and has suggested further losses forthcoming. The doji yesterday was interesting, but we should not afford it too much importance. Clearly it indicates indecision.
However, we would be more inclined to ‘charge’ the bullish contingency for lack of decisiveness. They have been the driver of the bus for many months and any indecision is more a mark against their conviction than an indication of frightened shorts.
As an aside, Many would point toward heightened tension from Russia/Ukraine and/or the Gaza Strip as cause for recent equity weakness. Others would note a nearer-by hike in Fed policy rates as ‘reason’ for weakness. However, we might also consider the recent changes to the confidence one can place in understanding the timing of Fed policy changes.
Until recently economic agents have had clear sight of policy intent well out the time line. This policy intent ‘visibility’ has recently been reduced. Inconsistent economic and inflation data and stronger FOMC committee opposition to ‘time reference’ guidance shortens the ‘knowable’ Fed policy path. This brings a long absent dose of uncertainty to a variable that for a long time has added considerable stability…if not economic growth.