 Hey everyone, this is Mike Kramer of my capital today is Wednesday, October 18th. It's around eight o'clock New York time So today we saw market sell off. We saw the the equity market sell off We saw the rates move higher bond prices sell off and we saw the dollar continuing to strengthen and Tomorrow at least Thursday October 19th, we're gonna have Jay Powell speaking at around noon he'll be doing a Q&A session with a moderator at the Economic Club of New York And they'll probably be links available that you'll be able to see that I would check with your local news or your or YouTube or perhaps the website for the the club and It seems that look the blackout period the blackout period comes On Friday and so he's obviously doing this at the last moment. This was scheduled. I think late last week Clearly if we know many of the Fed governors have come out and they're certainly leaning more towards being more patient approach not wanting to Raise rates at this meeting it would seem from the ones that I've listened to and heard it seems like some of that has been Moderated I think it's interesting that he's doing this at this point We've seen this before from him where he comes out right before the blackout date I can think back to November of last year specifically You know, he kind of moderated The expectations of a rate hike if you remember at that point the Fed was still doing 75 intervals And that was when you know, they started to indicate they were gonna start slowing the pace to 50 and then eventually they got to 25 and so It seems like, you know, if if I'm pal, I guess which obviously I'm not But if you're pal and you're thinking about, you know, where things are and how things have tilted the market expectation is that there is no rate hike in November and I think that he wants the market to at least Respect the idea that there could be a rate hike still to come You know, certainly the back of the yield curve has done a lot of work for pal The economic data is certainly been very supportive of him coming out and being hawkish but you know again the issue is is you're gonna try to balance the scales and and try to be the person who comes out tomorrow and not not so much that he You know wants the markets to go down But more so that he wants to kind of get the market to not be so sure that there's not going to be a rate hike in November that he wants the market to feel that every meeting is a live meeting and That's really the big question here because I don't really think there's much he could say that's really going to be new We know that the labor market is still tight. We know that they're showing some signs of loosening We know that wage growth is still too high. We know inflation is still too high We know super core CPI came in has shown a couple of months of acceleration on the month over month basis We know CPI on a year-over-year basis has certainly increased since June and expectations are rising for it to be closer to 3.6 to 3.7 percent by the end of this year We know that retail sales came in much stronger than expected So I mean there's certainly ample evidence to support the idea that he can come out tomorrow and try to you know rebalance the scales or perhaps, you know, just totally go with what the other Fed governors have been saying that Perhaps, you know, we may still raise rates again But right now we think that we're seeing some moderation in the data that suggests that maybe we can wait It seems redundant for him to come out and do that again only because that's what everyone's been saying and That's what the market is expecting So again, maybe he gives us a point of view where he talks about where rates are going to be over the longer term it doesn't really seem like exactly the appropriate time for that conversation, but That's sort of where we are right now And if we look at the the euro versus the dollar and we start with the currency market because currencies and rates usually have these things Pretty well understood You can see the euro has been consolidating here And what's really interesting about the euro is that it's been sort of just hovering around the 10-day exponential moving average Really that had served as a very good resistance marker for some time and you can see we got above it We came back below it now. We came above it again, and we're back below it again So certainly this could be telling us that perhaps the consolidation period in the euro is over Certainly you can see there's a broadening wedge here And I know I have the trend line drawn here because I was trying to illustrate it as acting as resistance, but if you were to move it just simply over this way and Adjusted a little bit you could also make the the argument that this is not only a broadening wedge But a potential bear flag Suggesting that the euro breaks below the 105 level and eventually undercuts this 104 Low that we had back at the beginning of October and begins to head back down to this 102 region Certainly from a port standpoint There's just not much long-term support in this area and so I think once you undercut this low I think there's a potential for you to see the euro drop back down to this 102 region when we look at the pound It's a similar sort of look here again. You can see the Trend line if we were to just move this over to here you could make an argument that this is Again a bear flag and would suggest that we undercut this low like the euro the 10-day exponential moving average has been serving as Good guidepost in terms of you know where this market is going to go So you can see it's already started to turn lower and you would just need a break below the 120 and a half level to really see that decline potentially into this 118 region and you can see why we've stopped here. This was an area of support back in the middle of March So again, it's not a big support region, but it's enough to have at least load it We'll see what happens at that point when we look at the yen The end is trying and really very close now to potentially breaking out It looks like the end is Consolidating in what appears to be a an ascending triangle We're pretty much at the end of it here, right? So it would seem there's going to be a big break one way or the other in the end I mean just given where the other two currencies are given where US rates have moved on the long end of the curve Given the strength of the economic data given BOJ monetary policy, which is still living in the wrong decade You would begin to think that yes There's the possibility that the yen breaks out here to the upside and above 150 The only issue we have is we don't know if Japan will come in and intervene Which looks like they did at this point in time and they also may have done so back Back at this point in time now. It's interesting because the other time they intervene They got closer to this 151 region 150 and a half 151 So there may be a little bit of room to see to get past that 150 region and for all we know The Japan may have already achieved his goal What which was just to slow the move higher in in the end and the end weakening? And perhaps that goal has already met and their threshold is at a higher level now Unfortunately, this is the type of thing. We're just going to have to wait and find out on When we move over to US markets, it wasn't really a pretty day for US markets We saw the NASDAQ get hit by about 1.4 percent We broke through support at this 14 990 and that sent us down to around 14 875 or so This green line this one green line here is a big level of Support that goes back all the way to the lows and right now. We're just we've been zigzagging around it We've also moved back below the 10-day exponential moving average, which could be a bearish indicator and Right now. We're also Additionally, we also hit this resistance level If we're just in the mode of playing ping-pong The next obvious sort of stop would be somewhere in this 14,300 region and and for that to happen, you know We nearly we obviously need to see some clear follow-through tomorrow to the downside and really an interrupted way Take out the low today 14 860 which is something that we really need to see happen pretty early in the day which would remove this Take this out of the way as well, which would really set up a pretty sharp decline down to this 14 600 region when we look at the Dow Jones Again, this is an index that's looked pretty troubling yesterday We noted the rising flag pattern, which is a little bit different than the typical flag This is more a reversal pattern and that certainly played out today breaking this uptrend, you know We're still at this 33,000 five sixty five region again Ideally if you're bearish if you're looking for lower prices You want to see the index the average gap below this support level tomorrow And I think that would set up a pretty sharp decline and the opportunity for that to happen Likewise, if we don't break that level you could be looking for some sort of rebound back to 33,790 and we look at the SMP The SMP Clearly broke down today. It hit this 4304 level Bounced right off of it. This is the level that really goes back here And it marks and it marks this area in here on the August 16 2022 area, you can see if you just zoom in here. I have this marked at 4305 And not this area just because when we came up with we stopped here and we held Then we moved higher when we came down We went below it and came back up and we stopped and so this tells you that this is some form of support and resistance That's stronger than this. This was also a key sort of turning area. So That's the reason why I have this 4305 level marked off and you can see we stopped right at it today and That was basically again where we were if you're bearish on the index You want to really see the the SMP 500? Gap below this 4300 level tomorrow Which is only 14 points and then I think that would open up a retest of 42 85 and then eventually a drop into the 42 20s Option expiration is this week as well. We know that there's a lot of gamma up in this 4400 region We know the call wall is up in that region the put wall as of today was around 4300 That probably also offered some support But as we go into OPEX on Friday the risk here is that everyone that has these calls at higher levels may begin to sell them That would allow, you know a market maker to begin to unwind some of their hedges The market maker will begin to unwind some of their hedges regardless because those calls that are open at higher levels Are going to start really losing value very quickly That means that they can start selling the positions They're longing as the hedge against the calls that they're short on And that could also act as a driving force pushing things lower and you know again with pal at 12 o'clock and the VIX only at 1920 There's a chance that you could see implied volatility ramp up just a little bit going into him speaking Around noon, which means that if you get implied volatility moving up into the low 20s ahead of him talking that implies that the morning could be Assault we were we see more selling take place in the morning and then once we get past him You see that event risk come out of the market implied volatility falls and you get one of those little afternoon pops That would be the sort of thing. I may be looking for tomorrow Just given the dynamics given how we know that the market tends to React and respond to some of these events were pal is speaking obviously There's a lot of other things going on in the world as well But this is just if we were to just you know, kind of take that out and just focus on pal This was this would be something that I would be looking for tomorrow. Anyway, I hope this helps and we'll see you soon. Bye