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Morning Commentary

THIS IS SPARTA!

By Charles Payne, CEO & Principal Analyst
5/10/2022 9:34 AM

To paraphrase the movie “300” on the across the board selling: “This is Madness!” The swoon has lurched into a dizzying freefall into what feels like a bottomless pit.

The carnage is overdone, and I think we will get a monster rally this week – one that could land among the biggest bear market bounces in history. The key is the Consumer Price Index (CPI) report tomorrow. However, something very interesting happened to the selloff yesterday. I’ll explain later, but first, take a close look at several measures.

First 88: This is the second worst start over the first eighty-eight days of a year in the history of the S&P 500.

Year

Return

Rest of Year

Full Year

1932

-26.6%

+16.1%

-14.8%

2022

-16.3%

 

 

1970

-13.3%

+15.3

+0.0

1939

-13.0%

+9.0%

-5.2%

1941

-10.5%

-8.2%

-17.9%

1942

-9.2%

+23.8%

+12.4%

Market breadth reflected the unmitigated disaster.

Market Breadth

NYSE

NASDAQ

Advancers

407

757

Decliners

3,033

4,177

New Highs

12

23

New Lows

1,063

1,710

Up Volume

349.29 million

935.36 million

Down Volume

5.62 billion

4.96 billion

The 1,051 more lows than highs on the New York Stock Exchange (NYSE) is the most since the pandemic panic in 2020.

Chart

A mind-boggling 1,687 more lows than highs on the NASDAQ Composite.

Chart

Heat Map

Believe it or not, one sector finished higher, as investors decided the good old food companies they grew up with were great places to hide out - because nothing is as comforting during moments of doubt as a bowl of soup and a box of cookies.

My goodness, the names that were higher are the places you want to be after a tsunami.

S&P 500 Map

Extreme

Interestingly, the so-called Fear & Greed Index is still a few clicks from the worst level of extreme fear.

According to Bespoke Research, every major exchange-traded fund (ETF) is now extremely oversold.

Image

Intriguing Twist

Yesterday bond yields surged at the start of trading, automatically sending stocks lower. But early in the session, bond yields began to turn around and turned lower, yet the stock market continued to move lower. So, what happened?

The Market became a reflection of what might happen when the Fed gets inflation under wraps.

Inflation winners like natural gas (NG) were huge losers during the session, while deflationary winners like the 30-year bond finished higher. I find this fascinating, but it’s too early to use in a decision-making process.

Portfolio Approach

We closed a position in Consumer Discretionary yesterday in our Hotline Model Portfolio.

TableDescription automatically generated

 

Today’s Session

Image

A lot of folks shifted to value stocks which have mostly been lower, but lot less than growth. Let’s use Planet Fitness (PLNT) and Peloton (PTON) as case studies the former is only down 11% since 2021 while the latter is down 90%.  It’s the story of the market which has been wringing out excessively overvalued growth stocks. Now the selling is excessive but trying to pick the exact bottom is a fool’s errand.

This is a good session to try and trade a bounce but longer term positioning should wait. Let’s see the CPI report in the morning.


Comments
Just now got home and tuned in. CP; But isn't that what bear markets look like? Indiscriminate selling with no clear bottom in sight? We haven't yet entered bear market territory on the Dow or S&P. Tomorrow, I expect a big bounce or another leg lower. Depends on the CPI number. I have GTC orders at target prices.....so as to eliminate emotion from the buy point. Checking my buy list for any others that may be coming into range. Set your alerts and act if you have the nerve. That's my approach.

Charles Haselberger on 5/10/2022 1:19:15 PM
 

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