It was not a mirage. The  market rocked yesterday, but it was like a pebble dropped in an ocean.  The market is so lopsided to the downside that there were only 55 new highs against 952 new lows on the NYSE and the NASDAQ Composite. Although the  up volume was powerful,  there is a long road ahead.

Market Breadth	NYSE	NASDAQ
Advancers	2,298	2,931
Decliners	1,036	1,734
New Highs	27	28
New Lows	390	562
Up Volume	4.00 billion	4.14 billion
Down Volume	1.39 billion	1.26 billion

Despite yesterday’s reprieve, the market continues to be in the grip of a punishing drawdown.  Going into the  session, the average stock on the S&P 500 was down 25% and the NASDAQ, 47%.

Decline from 52 Week High	Average Member Max Drawdown	% of Members -50% +
S&P 500	-25%	-4%
NASDAQ	-47%	-47%
Russell 2000	-44%	-36%

NASDAQ Pops

The NASDAQ Composite rallied almost 3%      but remained      a million miles below the all-time high that was reached only months ago.

As I’ve pointed out before, these big up days on light volume are disheartening.      There are a number of upside tests, including key resistance points:

• 13,250

• 13,750

And as the NASDAQ entered bear market territory yesterday, the correction was already the second-longest since the great financial crisis.   It matches the 2018 drawdown that was even more crushing.  Just think back to that point where a lot  of folks were bailing out.

Heck, the Fed hiked rates right before Christmas, but it turns out Christmas Eve was the bottom.

I know this is a gut check, but I urge folks to stay in the market.      That doesn’t mean 100% vested or not taking losses, but in the market, be poised and ready to take advantage of the greatest money-  making machine in history.

The Fed Meets

The market is supposed to be much higher one year from today.  Going back to the early 1980s, the market has rallied a year after the first rate hike 100% of the time. 

This time could be the same if the Fed is decisive.

Portfolio Approach

We are adding a new position in Financials this morning, as well as adjusting several sector weightings in our Hotline Model Portfolio.

Today’s Session

All eyes are on the Federal Reserve after all eyes watch and listen to Ukraine President Zelensky.  One of these events will tug at heartstrings, and even get more folks to chime in on greater involvement by the United States, including risk that could draw America into war with Russia.

The other event is walking a tightrope, as Jay Powell will try to come across as firm on inflation and even willing to derail the economy in the process of taming the monster that he helped to create.

What everyone wants to know?”

• Will there be 50bps hikes in future?
• Will Fed speed up timing and pace of quantitative tightening?
• Will he crush the economy in order to save it from inflation?

Right now the market is modeling for a 50-bps hike at the May meeting, but then a series of 25 bps thereafter.

Retail sales this morning came in significantly below consensus, but there were monster revisions, including headline to 4.9% from initially reported 3.8%.

The control group number for January was revised to 6.7% from 4.8%, but February tumbled to -1.2% while the street was looking for +0.3%.

Tweet

 

Home | Products & Services | Education | In The Media | Help | About Us | Disclaimer | Privacy Policy | Terms of Use | All Rights Reserved.