Not much from the Fed or the Treasury

Paid subscriber analysis

The first part of the super fun-packed week is done. The Treasury came out with its projections today, the Fed delivered its July policy statement, and we got 2/4 Mag4 earnings.

The day before, however, was even more interesting. First SPX futures fell down 1.3% at one point after a negative reaction to MSFT earnings (it was a beat, but lower growth than expected, although a lot of that was reversed during the earnings call). Overnight, the entire move reversed, and we opened up 1.3%. What. A. Bounce!

Typically, when you get a reversal like this, it’s a strong technical indicator for markets to change direction (from bear to bull in this case).

The potential reason? Bank of Japan hiked rates to 0.25% (it was less than 0 for almost ten years, and this was the second hike this year), which was a major move that impacted the Yen-Dollar trade, consequently pushing US equities up significantly. I’ve read a few analyses saying the Yen weakness (investors selling Yen for USD) over the past two weeks was partially responsible for funding the rotation we saw (from Tech to small caps), so as this move by BoJ finally came through, the Yen driven rotation is probably over - hence the market bounce.