With the Jackson Hole Fed meeting coming up, the market could be expecting taper talks, as the Fed at some point will be looking to decrease their $120 billion monthly bond-buying program. However, the Fed has been very accommodating and with the COVID-19 delta variant, does not want to jostle the economy and market. Additionally, the economy continues to struggle with supply disruptions, giving further reason for the Fed to hold off on tapering. Therefore, if taper talk is addressed, it's likely to be pushed further down the road into 2022.
From a market perspective, the S&P 500 (SPY) and the Nasdaq 100 (QQQ) are breaking to new highs while the Russell 2000 (IWM) has rallied up towards a pivotal resistance level at $225. So far, the market is not worried about the Fed meeting, although it can be quick to change its mind. With that said, any talk about monetary policy changes at the Jackson Hole meeting could influence bonds and banks.
Currently, the long-term bonds (TLT) have taken a shift lower, while the Regional Banking sector (KRE) has again cleared its 50-day moving average at $64.35. When it comes to bond-buying, talks of tapering can work in the bank's favor, and therefore this could be the reason banks have been able to strengthen in the past week. Therefore, we should keep an eye on Regional Banking ETF (KRE), along with TLT, for their reaction to the meeting, as well as the very pivotal $225 level in IWM, the only major index that has not cleared all-time highs since March.
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- S&P 500 (SPY): Again, new highs.
- Russell 2000 (IWM): Watching to clear 225.
- Dow (DIA): 356.60 high to clear.
- Nasdaq (QQQ): Another small range day. Doji day.
- KRE (Regional Banks): 67.22 recent high to clear.
- SMH (Semiconductors): 271.79 high to clear.
- IYT (Transportation): 248.88 support. Flirting with the 50-DMA at 256.01.
- IBB (Biotechnology): 164.27 support.
- XRT (Retail): Needs to hold 97. 98.50 resistance.
Assistant Director of Trading Research and Education