Stocks began the day weak and weaker than most traders probably realized. As you can see in the intra-day chart below, short-term momentum, as measured by Real Motion, had rolled on Monday.
As a result, when the SPDR® S&P 500 (NYSE:SPY) broke its 30-minute Opening Range low (as shown in the chart below), it accelerated lower.
The pattern to notice in the chart above is the divergence in Real Motion’s two moving averages vs. the same moving averages in the price chart.
The day began with the Real Motion averages negatively stacked (the 50 in blue, under the 200 in green). The is weak momentum, even when the price moving averages aren’t negative (yet).
Opening Range breakdowns tend to follow through when this divergence occurs, as it did today.
Today was particularly bearish as there were good reasons for stocks to be under pressure. Regional banks broke down to new year-to-date lows, and the crude oil ETF, USO had its biggest down day since July 2022.
This dragged down energy stocks and stoked fears of an economic slowdown. Adding to the uncertainty, the Fed will make an interest rate decision tomorrow.
Flight to safety and worsening fears of an economic slowdown were confirmed by the big rally in the long bond ETF, TLT.
Tomorrow gold may be the biggest mover.
Gold is often referred to as the asset that rises and falls with inflation, but gold’s favorite time to shine is in periods when markets lack confidence in the monetary system.
Today the market’s mood concerning the regional banking system went from bad to worse, as exemplified by the action in the S&P Regional Banking ETF (NYSE:KRE) and the Financial Select Sector Fund (NYSE:XLF).
Tomorrow, the Fed will likely raise rates again, which is expected. However, if Chairman Powel’s remarks create a further loss of confidence in the Fed’s ability to navigate the worsening banking crisis, economy, and inflation risks, the weekly gold chart (below) is ready to shine.
ETF Summary
- S&P 500 (SPY) 23-month MA 420
- Russell 2000 (IWM) 170 support - 180 resistance
- Dow (DIA) Over the 23-month MA-only index
- Nasdaq (QQQ) 329, the 23-month MA
- Regional banks (KRE) 43 now pivotal resistance
- Semiconductors (SMH) 246, the 23-month MA
- Transportation (IYT) 202-240 is the biggest range to watch
- Biotechnology (IBB) 121-135 range to watch from monthly charts
- Retail (XRT) 56-75 trading range to break one way or another