The Storms Continue: Time to Watch Gold?

Navigating Fed hawkishness, soaring bond yields, and tech volatility with key technical levels and safe-haven setups

U.S. stocks closed sharply lower, suffering a steep broad-market sell-off catalyzed by a combination of hawkish Federal Reserve division, mounting inflation fears, and geopolitical escalation. The Federal Reserve voted 9–3 to maintain benchmark interest rates steady at 3.5% to 3.75%, marking an ongoing pause . However, the decision rattled investors as three regional Fed presidents dissented in favor of an immediate quarter-point rate hike due to sticky inflation. This divided stance, coupled with Warsh’s commentary highlighting persistent price pressures, triggered a strong sell-off as the price of the SPX reversed from 7,452, our key central monthly level that has defined momentum and volatility over recent days.

Compounding these domestic concerns, geopolitical tensions spiked following an unexpected attack on U.S. forces in the Middle East, moving oil CL=F +7%, and intensifying worries over rising energy-driven inflation. Let’s see if the high probability setup posted for XOM during the weekend reaches its bullish target.

On a shorter-term basis, the market lost the 7,421 central daily level at the open and slid to 7,352, our second bearish layer, by noon. Prices found a temporary bounce and gained traction when the widely anticipated interest rate pause was announced, but reversed sharply once the Fed Chair began his commentary. During rate decisions, the Fed Chair’s remarks are just as critical as the policy choice itself. As longer-term bond yields surged, the recovery vanished, pushing the SPX down to test the 7,321 daily bearish level shared yesterday.

Tech presented oversold conditions that opened up the probabilities for a bounce, for that reason I shared last night daily levels for QQQ and SMH today, but 674 and 527 respectively were not conquered, and both ETFs closed at the lowest daily levels shared last night: 662 for QQQ, and 502 for SMH. See how the three tickers closed at their lowest daily level in synchrony, another reference of why institutional algorithms react to these modeled levels ahead of each session.

With the potential bounce unconfirmed by the recovery of key levels for the SPX and QQQ, we continue studying the likely sell-off destination outlined over the weekend. Let’s begin our mid-week market update by examining the SPX, QQQ, SMH, and GLD, alongside current setups for META, MSFT, AAPL, AMZN, AMD, and GOOG now that its post-earnings gap has been filled as expected.

I highlighted four elements over the weekend that were likely to pressure the stock market. So far, geopolitical tensions and the Fed’s hawkish tone are playing out. On the tech earnings front, MSFT’s preliminary move of +8% is offsetting META’s bearish reaction of -7%.

Will Gold reappear as a safe-haven asset? I will be doing a deep dive into gold, covering both its technical setup and the macro aspects you need to consider.

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SPX - The bearish target outlined during the weekend continues in play: