Via a Goldman Sachs stock sell note.
- Since Nick Timiraos’ Wall Street Journal article on the future size of the Fed’s debate hike, “we’ve seen one of the biggest 5-day easings in financial conditions this century”…you “just can’t be short”.
- “I’m old and grizzled enough to know that when Nick (goa)T tweets that the Fed is stepping on the brakes, you get out of the way, even though you still think the ultimate path for stocks is lower. I’m waiting to see if Jérôme blesses this easing of the financial conditions.”
- “Between these soothing words from the market of officials, as well as the sheer event risk premium exiting the flight markets as the ECB, BoJ and earnings pass, there has been a significant reduction in the share flight curve this week.”
- “The focus is now firmly on Powell. Is he okay with this easing of financial terms? That’s the only question you need to ask yourself.”
The note goes on to say that while the fundamentals aren’t good (cites tech companies with operating margin declines this quarter), the technicals are:
- the recent decision “is that technicals prevail as volume compresses, uneconomic buyers are forced to buy, while the fundamental picture deteriorates, but this is more of a medium story term”
- “If J Powell gives the go-ahead next week and doesn’t deliver a Jackson Hole type performance, there’s very little to stop that movement from a technical standpoint. A moving body stays moving. Ultimately, it’ll be a wonderful shorting opportunity, but there’s no point in embracing the freight train if JPow is waving a green flag.”
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