The fact that the pessimism caused by the expectations of a hard landing in the US is gradually diminishing has strengthened the expectations that the Fed will cut the Fed Fund rate 25 basis points instead of 50.
In addition, the fact that the Fed will implement a monetary policy in line with the ECB and BOE may also reduce the volatility in the currency markets. Some time ago, the Deutsche Bank currency volatility index rose due to uncertainties regarding the Fed’s monetary policy, resulting in an increase in the VIX index and a large-scale decline in equity markets. (Chart 1, Purple and Yellow line, respectively)
At this stage, both the VIX index and the currency volatility index are declining as uncertainties regarding the Fed’s policies have decreased.
I think that the SP 500 index will continue its horizontal course unless there are significant deviations in the economic indicators to be announced and economic data that hints drastic changes in the monetary policy.
If today’s producer price index and new job applications come close to expectations, the scenario mentioned above may come true. (Chart 2, Blue line)
Finally, the fact that the net long positions of the funds are in the middle of the last three years indicates that the funds are still undecided to purchase new shares at this stage. Chart 2, Green line)
Conclusion: In light of this information, possible pullbacks in the index can be considered as a buying opportunity during the session.
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