Yesterday’s seesaw session appeared to be down for the count as major indices lurched into collapse mode, and investors backed away from their monitors, buckled up and placed their heads between their legs.

Then the market stopped going down, and buyers pounced.

Market Breadth	NYSE	NASDAQ
Advancers	1,428	2,763
Decliners	1,898	2,032
New Highs	13	28
New Lows	628	744
Up Volume	2.97 billion	3.57 billion
Down Volume	2.22 billion	1.39 billion

Communication Services (XLC) led the way as Meta (FB) and Netflix (NFLX) were higher out of the gate.

Sights Were Set

At one o’clock, a smattering of stocks was higher. At the close, the Heat Map hadn’t changed, just the intensity of those names that were higher earlier in the session.

Showing Grit

Reversals	S&P 500	Russell 2000	NASDAQ Comp	NASDAQ 100
High	4,169	1,888	12,542	13,083
Low	4,062	1,839	12,202	12,716
Close	4,155	1,882	12,536	13,075

All the major equity indices staged strong reversals, but none as powerful as the NASDAQ-100 (NDX), which climbed from -1.09% to close at +1.72%.

Before we break out the champagne, according to SentimentTrader.com, in the fourteen times the NASDAQ -100 climbed off a decline of 1%, which was also a 52-week low, to close up 1% +, it was down days later and off even more weeks later. 

Watching the Fed

The Federal Open Market Committee (FOMC) gathering begins today, and we will get the decision tomorrow. But unfortunately, it’s a foregone conclusion that the real show will be the question-and-answer period. Right now, the Street is looking for an avalanche of rate hikes.

Meeting	Hike	Fed Funds Range
May	50 bps	75-100
June	75 bps	150 – 175
July	50 bps	200 – 225
September*	25 – 50 bps	250 - 27

Yesterday, the ten-year bond yield kept pressing near 3% even after that big Purchasing Managers Index (PMI) miss. Something has to give.

 

Scared As Hell Yet?

The Street is betting that individual investors will blink. In a way, it’s the Street looking for a 100% reversal of the ‘animal spirits’ that spurred the new investor revolution.

I think the fear gauge will get deep red, and the American Association of Individual Investors (AAII) survey will stay below 20% bullishness. Still, a lot of investors are not going to give Wall Street the satisfaction of being ‘paper hands’. People have heard forever to buy-and-hold and take the long view, and many are okay with sitting on big paper losses.

With that in mind, I think there will not be a climactic event that serves as the final flush.

Portfolio Approach

There are no changes to our Hotline Model Portfolio this morning.

Today’s Session

I’m liking the action ahead of the open.

Comments

CP; You, having experienced life in the silo...Didn't you leave out the final phrase: "Buckle up, place head between knees, kiss your a_ _ goodbye? Just kidding, Like yourself, I have unshakable faith in the long term trajectory (no silo joke intended) of the US stock market. (Assuming continued economic growth long term) I have 250 years of market data to backstop my conviction. That being said, I wish I could be as optimistic as you regarding my outlook over the next 6-12 months or so. I can not. Realizing that I am not smart enough to CONSISTENTLY sell, go to cash, get out, within 10% of market tops and re-enter within 10% of market bottoms, I remain invested throughout the myriad ups and downs. I do however raise cash or add cash from time to time, have my watch list at the ready (always on the hunt for new prospects) and make investments from time to time when a list prospect looks especially attractive. YMHOS, CH Charles Haselberger on 5/3/2022 10:26:41 AM

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