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Summary

In this financial market analysis session, the focus is on the S&P 500's buy bias and the potential impact of the PCE print and Canadian GDP release. The presenter discusses the Fed's rate cut expectations and the importance of the labor market's health. They analyze market reactions to economic data, highlighting the significance of non-farm payrolls and the end-of-month effect on stocks. The session provides insights into trading opportunities, emphasizing the need to watch for trapped buyers and sellers to identify potential market reversals and entry points for long positions in the S&P 500.

Takeaways

• 📈 The S&P 500 has a buy bias and it's considered safe to hold through the PC event, which is anticipated to be low impact.
• ⚠️ There's a risk if the PCE print comes in higher than expected, which would be an immediate exit signal for the S&P 500 position.
• 📉 Analysts predict a core PCE reading of 0.15% and an annualized reading around 2%, indicating a drop and potential downside for the dollar if the drop is larger than expected.
• 💹 The Federal Reserve is expected to cut interest rates four times this year, with a 33% chance of a 50 basis point cut in September.
• 📉 The labor market is showing signs of weakness with initial and continued jobless claims trending higher, and nonfarm payroll jobs trending lower.
• 💲 The prospect of monetary easing is supporting the S&P 500 and weakening the US dollar.
• 📊 The Canadian GDP release at 1:30 is a potential trading opportunity, with expectations of a 0.6% reading and the potential for CAD strength if it surprises to the upside.
• 🌐 The US and Canadian GDP releases are significant as they can influence currency pairs like USD/CAD.
• 📈 The S&P 500 long position is still valid post-PC print, and there's a potential for a retest of recent highs.
• 🔍 The market's focus has shifted from inflation to employment, with the Fed's dual mandate of maximum employment and stable prices guiding their decisions.

Q & A

What is the current bias for S&P 500 according to the script?

The current bias for S&P 500 is a buy bias at market, which is fine to hold through the PC event.

What is expected from the PC event mentioned in the script?

The PC event is expected to be low or a non-event, with the risk being that the PCE print comes in higher than expected, which would be an immediate exit signal.

What is the significance of the CPI and PPI prints in relation to the PCE print discussed in the script?

The CPI and PPI prints are used to calculate the PCE print, which is expected to show a disinflation process at work. The Fed is less focused on inflation currently, making these prints slightly less important.

What is the expected outcome of the US PC print and its potential impact on the dollar?

The US PC print is expected to be a mild 0.15% core reading and an annualized reading around 2%. A larger drop than expected could lead to further downside in the dollar.

How many interest rate cuts is the Fed expected to make this year according to the script?

The Fed is expected to cut interest rates four times this year, as per short-term interest rate markets.

What is the significance of the non-farm payroll data in the context of the Fed's dual mandate?

The non-farm payroll data indicates a steady addition of jobs to the economy, but recent revisions show a lower number than initially thought, suggesting a potential weakening in the labor market which is part of the Fed's dual mandate for maximum employment.

What is the potential opportunity discussed in the script in relation to the Canadian GDP release?

The potential opportunity lies in the Canadian GDP release, where a print well below market expectations could lead to downside in the Canadian dollar.

What does the script suggest about the market's reaction to the PC print and CAD GDP release?

The script suggests that the market reaction to the PC print should be benign, and any strong print could lead to CAD strength and USD weakness. However, the overall outlook for the Bank of Canada to cut interest rates remains unchanged.

What is the strategy for trading the S&P 500 according to the script?

The strategy for trading the S&P 500 is to hold long positions, with potential entry points around the volume-weighted average price and looking for areas where buyers are in control and sellers are trapped.

What is the outlook for the Euro US dollar as per the script?

The outlook for the Euro US dollar is to look for potential long opportunities from the support level, with a focus on areas where buyers are in control and sellers are trapped.

How does the script summarize the big picture regarding the Fed's actions?

The big picture is summarized as focusing on whether the Fed will cut interest rates four times this year and if the labor market is slowing, which are the key factors influencing the Fed's decisions.