It was a dismal end to a dismal quarter, but what is even worse is that there are no indications that the bear market is going to end soon. Stocks have been in near-freefall since the higher-than-expected consumer price index report on Sept. 13, and Fed members are saying nothing to make market participants optimistic.
Back in August, there was hope that the Fed would at least hint at a dovish pivot and that would put a bottom in the market, but that has now morphed into the view that the Fed isn't going to pivot until something ugly and dramatic happens.
We had a taste of ugly and dramatic this week in the UK when the Bank of England announced an emergency quantitative easing program as pension funds came under extreme pressure due to weakness in the pound and the bond market. The situation is still a mess, and the question that is being asked is, 'who is next?'
There were at least a dozen interviews with Fed members this past week, and they have been quite uniform in their hawkishness. It was even stated that a recession would not stop the Fed from raising rates to battle inflation.
With the Fed so clearly hawkish, there was increased talk that it would take a crisis like that which hit the UK to cause them to shift. The terminology that was being tossed around was that 'something will have to break' to cause the Fed to soften its stance.
We will see, but the only thing that really matters right now is that the price action is about as bad as it gets. We are in the jaws of a very ugly bear market. The June lows are not holding, and there is no technical support. Bounce buyers keep hoping for oversold bounces, but the one big one we had this past week was totally reversed the next day, and we saw even more selling on Friday.
The good news is that this horrible action is creating conditions for a glorious recovery, but we will have to wait for it. There is no reason to rush into this market right now. There will be plenty of time to buy bargains when the charts start to improve.
Have a great weekend. I'll see you on Monday.