Fed fatigue and seasonality

I meant to post sooner but I was busy and then I caught COVID. It was another crazy month. We went from a horrific September to a blissful October.  After my last post the market dipped back down as once again, any notion of a Fed pivot got shot down. As were were drifting near 52 week lows the notion of no fed pivot kept getting hammered into everyone's brains to the point where I was sensing that maybe we are getting to the point of Fed Fatigue i.e. an acceptance of no pivot. So if that's the case, I thought that maybe the market would get tired of going down over the same thing. The so called next shoe to drop according to the bears is for earnings to collapse and layoffs to spike. As earnings started rolling in that was simply not the case. Sure, there were some disappointments including some of the big tech names, but overall it has been a rather benign earnings season. Even though the tech giants AMZN, GOOG and MSFT had disappointing results and/or outlook banks and other companies have had good or OK results. This less than disastrous earnings season coupled with the so called bullish seasonality of the mid-term election cycle started the rally and when big tech earning disappointments last week couldn't take down the market, a lot of bears who positioned for the kill shit themselves and covered adding fuel to the fire. 

So now what? We have the widely expected 75 bps hike this coming week. Bears are counting on the Fed to piss all over this rally again, but this time around the set up is different as the market has not been rising on hopes of a Fed pivot and so even if the Fed reiterates this, it may not amount to much aside from a knee-jerk reaction. If the market fails to show any sustainable downside, it's going to embolden the bulls more and make the bearish shit themselves yet again. I could see the market ultimately going as high as SPX 4000-4100 on this latest rally. We'll see. The Bank of Canada hiked by only 50 bps last week which was taken by some as a pivot which is a bit of a stretch in my opinion. A true pivot is a clear indication that rates are going to at least stop rising in my opinion. People have been so desperate for a pivot that they are willing to count this less than expected hike as some sort of a quasi pivot; that perhaps the end of the rate hike cycle for Canada is getting close. I believe this too may have contributed to the positive market tone last week but not much.  

Despite all I've said, there's still problems with market action, namely, the fund flows continue to show FOMO. At the same time though, positioning from hedge funds and other measures like option activity shows bearish extremes that you see at major lows. I'm really struggling with these offsetting indicators. Therefore, I continue to believe that one be tactical. The tactical bullish call I made earlier this month is still in play although now the easy money has been made. If this rally ends up going to SPX 4000-4100 it will look a lot like a base-building bottoming scenario is in play. I would then expect more base building until March 2023. I'm clearly getting way ahead of myself but that's kind of how I see things unfolding IF the bull case is to play out.  By the way...Trader X once again mentioned earlier this month that it was not the time to start building long term positions.  Remember, he said the same thing in early July and in April 2000. Food for thought....