The fate of the global capital market tonight is like a puppet tightly bound by the string of destiny, and the two powerful forces capable of turning the situation around are the upcoming US non-farm employment report to be announced at 21:30 Beijing time and the monetary policy signals to be released by Powell at 03:00. These two key events intertwine, inevitably triggering a storm, and the fate of the market will be set accordingly, possibly giving rise to the following four frightening scenarios:
Scenario 1: Non-farm 'explosion' and policy 'emergency rescue', market takes a thrilling roller coaster (Probability 25%)
If the non-farm data experiences a cliff-like drop, shocking the market like a collapsing building, and Powell urgently throws out dovish signals to stabilize the market's morale, then the market will be like an extraordinary 'deep V roller coaster'. At that time, the stock index may plunge sharply in an instant, reaching a drop of 4%, breaking through important support levels. However, under the strong expectation of policy support from the market, it may quickly rebound, ultimately closing flat. However, this false prosperity created by relying on policy 'stimulus' often resembles a crisis hidden in a candy-coated shell, likely indicating that the market will unknowingly fall into a downward trend over the next week, facing the threat of chronic 'death'.
Scenario 2: Stable data, warm policy, tech stocks stage a stunning rebound (Probability 35%)
If the performance of the non-farm data aligns closely with market expectations, just right, and at the same time, Powell releases positive policy signals, it will undoubtedly inject strong recovery momentum into tech stocks, like a spring breeze. At that time, the Nasdaq index, dominated by tech stocks, is very likely to regain as much as 500 points in one go. However, it should be noted that behind this seemingly beautiful market may hide the fatal trap of 'policy expectation overdraw'. Once the market overly speculates on interest rate cuts and completes all pricing, any slight fluctuation in the market thereafter could trigger a more severe secondary collapse, inflicting heavy losses on investors.
Scenario 3: Double blow from non-farm and policy, market faces a 'Black Friday' deadlock (Probability 20%)
When non-farm data is as devastating as an avalanche, while Powell suddenly changes his stance with an unexpectedly hawkish attitude shocking the market, the entire capital market will instantly turn into a bloody 'black battlefield'. Stock indices will drop sharply at an unimaginable speed, experiencing a cliff-like decline of 7%. In this case, a large number of algorithmic trading strategies will collectively collapse due to triggering risk controls, leading to a chaotic scene. Although after the sharp decline, the market may experience a certain degree of technical rebound due to its resilience, looking back at the bear market cycle of 2023, once such a deep adjustment occurs, the mid-term downward adjustment may last for hundreds of trading days, and the market will endure a long and painful winter.
Scenario 4: Data without waves, hawks appear, bulls and bears meet in a narrow path (Probability 20%)
In the case where non-farm data is calm and fails to stir up significant waves in the market, Powell insists on releasing hawkish signals, attempting to suppress the market. At this time, both bulls and bears are engaged in a life-and-death struggle in a narrow and cramped space. The intraday market may initially rise and then fall in a 'rise followed by a decline' strangulation trend, with intense clashes between bulls and bears, and the battle is stalemated. However, the real fatal crisis often hides beneath the calm; after a period of sideways movement, the market may suddenly change direction without warning, like the eerie silence before a storm, and funds will quietly reposition themselves in the undercurrents, determining the new direction of the market.
In the current market environment, investor sentiment is extremely sensitive and fragile, like a startled bird; any slight change may trigger a chain reaction in the market, becoming the last straw that breaks the camel's back.
