To The Moon

THE STOCK market rose yesterday, my article was basically accurate, at least the US stock market fell to a level where the Fed didn't want it to fall again (the previous decline was also welcomed by the Fed).

The three major stock indexes all rose by more than 1.5% (the Nasdaq rose by 1.59%, the Dow rose by 1.98%, and the S&P 500 index rose by 1.86%), indicating that there is still upward momentum in the short term. If last night's increase was around 0.5%, it is unlikely that a short-term bottom will be determined.​​

​According to the survey released yesterday, most people think that US stocks have not bottomed out yet. The survey results of non-professionals are usually reverse indicators.

Yesterday was originally a day without an important economic agenda, but the stock market achieved such an increase, which can be seen as a carefully laid-out bottom:

First, Biden made a speech on the tariff issue, saying that some tariffs imposed on China may be cancelled (which is enough to put the stock market into lift-off mode).

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​Second, Atlanta Fed Chairman Bostic said that the pace of raising interest rates might as well be suspended in September.

​Bostic spoke in Atlanta

'I think it might make sense to suspend interest rate hikes in September,' Mr. Bostic told reporters. When we get past the summer and we consider policy positions, I think a lot will depend on what we are starting to see on the ground, my motto is to observe and adapt. Supports Chairman Powell's plan to raise interest rates by 50 basis points at the June and July meetings respectively, but more aggressive action may be needed if inflation exceeds expectations.

Recent financial market movements, including last week's stock market crash, are in line with the Fed's financial tightening targets.

The Fed aims for a soft landing, bringing inflation down to 2% and bringing the labor market back to normal, adding that flexibility is needed to achieve that goal. It is difficult to know exactly how far or how hard we need to push. But I think we will be in a good state by the end of the year in the range of 2% to 2.5%.

There is a lot of information.

-The words "suspend interest rate hikes" are enough to shock the market, and it is the first time that they have been spoken from Fed policy makers.

-"Last week's stock market crash is in line with the Fed's financial tightening target", which confirms the accuracy of my previous view-the Fed needs to let the stock market fall to fight inflation, but the S&P 500 index rebounded after a short bear market last Friday, indicating that the decline of US stocks has reached the tolerable level of the Fed.

-"Flexibility is needed to achieve goals", which is not only flexible in monetary policy, but also includes the impact on financial markets.

Fed officials are not ignorant scholars, and it seems that all this was planned long ago.

The hawkish level of the Fed has reached its peak and started to fall back. As far as the global market is concerned, this is the beginning of a short-term change, and there is another major trend to pay attention to under this change-the rise of the US dollar has stopped

Since last week, my "fear and greed index" has been the first to send out the signal that it will peak and fall back. A previous rise in the dollar could help the Fed fight inflation (lower the price of imported goods), but to a certain extent, the Fed needs it to fall, especially if the Fed thinks that the decline in US stocks is in place.

One thing that strengthened my view yesterday-the European Central Bank signaled an increase in interest rates in July, bringing austerity expectations forward.

European Central Bank President Lagarde said in a blog post on Monday that the European Central Bank may start raising interest rates in July and get rid of negative interest rates before the end of September.

After this view was announced, the euro/US dollar rose to the highest level in the past month. The euro accounts for the largest proportion in the weight of the US dollar index, and the euro will enter a short upward cycle, which will put pressure on the US dollar.

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​However, there is one thing to note: the current market trend can only be judged as a structural pause rather than an end, and we will alsoGo through the Fed's stop-and-go repeated evaluation.

Again, everything will be clear only if we can set the date for the last time the Fed raises interest rates sharply.

Yesterday, a reader left a message: "This is going to be a bull market? It's as simple as that? Decide the bull and bear overnight?" .

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