Yesterday was another impressive session, where the same forces that tripped up the market on Tuesday were largely ineffective – but they tried, nonetheless.

Market breadth improved greatly, especially the up volume on the NASDAQ.  And there is a chance we could see more new highs than lows on the NASDAQ and NYSE.

Market Breadth	NYSE	NASDAQ
Advancers	2,242	3,397
Decliners	973	1,305
New Highs	25	55
New Lows	36	57
Up Volume	2.91 billion	4.50 billion
Down Volume	1.47 billion	1.16 billion

This is a dicey point for the market.  The S&P 500 is in the shadow of a huge technical hurdle – beyond that point, it could rally to the 200-day moving average in a blink.

S&P 500 Heat Map

It was all about those growth sectors yesterday, as the market was led by Technology, Consumer Discretionary and Communication Services.

They are putting the band back together.  MSFT, AAPL, GOOG, AMZN and TSLA are back to their winning ways, and even META joined in; although, it’s a long ways form regaining any of its former swagger.

On the Move

It wasn’t long ago when Energy was the only sector with a majority of its components above their 50-day moving average, but now it’s trailing badly.

Looking further out, those defensive sectors still have the most components trading above their 200-day moving average.  I have been warning these safe havens have been expensive.   This morning, Clorox (CLX) is opening under pressure after posting results after the close.

NASDAQ in Focus

Performance Year to Date
Index	YTD	Max drawdown	Average member	Return from low
S&P 500	-13%	-24%	-30%	13%
NASDAQ	-19%	-33%	-44%	19%
Russell 2000	-15%	-27%	-42%	16%
Source Charles Schwab

Don’t look now, but the NASDAQ us up 19% from the low- at 20% is means a new bull market has begun.  I get that’s hard to conceptualize amid all the carnage and rubble, but price movement is infectious and so are milestones.  Seventy four percent of the components are trading above 50-day moving average.

A major breakout is just ahead, then it can potentially race to its 200-day moving average.  Note, these kinds of setups are also crushers when they come up short.

Recession Thoughts

For a moment, the market stumbled when the Service PMI report from ISM came in better than expected.  The highlight was the sharp drop in Prices Paid.  But if that’s a harbinger of recession, maybe the news wasn’t that great after all, and maybe that’s why the market rallied hoping the Fed is closer to its goal of wrecking the economy.

Listening to what respondents said was very telling as well.

Speaking of the Fed

San Francisco Fed President Mary Daly is laying it on thick and very pissed the stock market has been rallying since the FOMC rate hike. She says a jobs slowdown is “completely wort it” to fight inflation.

Moreover, she is justifying the Fed’s need to make us all poorer by suggesting we have enough stuff.

From San Francisco Fed Website

Mary’s leadership is underpinned by her belief in “3D public service,” the need for public servants to be fully human —vulnerable, compassionate, optimistic, and pragmatic—to help solve the most pressing issues of our time.

The Fed is not going to like that individual investors are becoming more bullish, but they should feel great that asset managers and leveraged funds are short.

This morning initial jobless claims came in a touch above consensus at 260,000.  It’s a slow, but steady, move higher.  Not a red flag, but a sign the best of the jobs market is over.

Portfolio Approach

Yesterday, we closed a position in Technology and added a new idea in the same sector in our Hotline Model Portfolio. If  you are not a member of our Hotline service, call your account representative or email Info@wstreet.com to sign up today. 

 

Comments

Perhaps Mary Daly is overpaid. Charles Lucente on 8/4/2022 9:38:40 AM

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