US Close – September Swoon, OPEC+ bounce faded, Gold back in danger zone, Bitcoin jitters, Memes under pressure

The September swoon is in play as a resilient economy paves the way for more Fed tightening. Stocks are going to struggle because too much of the economy is doing well and that leaves Wall Street vulnerable to an extended period of rising interest rates. The dovish pivot and the end of interest rate hikes with the December FOMC is not how this will play out.

After the ISM Services index rose to a four-month high, Treasuries extended their losses.  Demand is improving and that is good news for the economy.  The services ISM index improved to 56.9, a nice beat of the consensus estimate of 55.3. 

Oil

Energy traders are going to be quick to fade any oil rally that emerges as the short-term crude demand outlook appears to be poised for another wave of China COVID-related lockdowns.  Despite some better-than-expected US services data, global growth isn’t looking good at all and that is trouble for crude prices. Fading the OPEC+ production cut bounce wasn’t that hard to do given a laundry list of global economic challenges. 

Gold

Gold is back in the danger zone as global bond yields are skyrocketing.  The US economy is looking pretty good and that has many traders starting to doubt that we’ve seen the peak in yields.  Gold is in trouble here if the bond market selloff is the dominant theme of the trading week. Fixed income markets are getting flooded with corporate debt offerings and central banks seem like they will be aggressive with front loading rate hikes right now. 

It could get ugly quickly if gold breaks below $1690 level as there isn’t much support until $1650. 

Bitcoin

The retail trader is starting to panic again as meme stocks and cryptos fall under pressure. Bitcoin is breaking below the key technical levels.  Bitcoin’s correlation with tech stocks continues and the surge with Treasury yields is a troubling sign. Many are starting to doubt that the peak in yields is in place and that could spell trouble for Bitcoin.  Bitcoin selling pressure will next eye the summer lows just ahead of the $17,500 level.

Memes

So many Meme stock traders got hooked after early success beating Wall Street with GameStop and AMC, but meme mania will struggle given the current market environment. 

The underlying fundamentals for so many stocks that went viral remains rather bleak. Companies from GameStop, AMC, Bed Bath & Beyond, and many more are still overvalued companies that continue to see hype from the WallStreetBets crowd. 

Meme stock trading is evolving and will likely end up just being good for very short-term coordinated rallies, but right now looks it is time for some froth to go.

Some diamond hands will be tested and it could get uglier a lot sooner if Wall Street starts believing the Fed will be much more aggressive than what the market has priced in for rate hikes. 

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