Stocks fell sharply again Tuesday, undercutting Friday’s low by falling roughly 1.9%. The market turned on Powell’s tapering stance, which seemed to favor a faster taper. It was noted on a few occasions on TV about the timing of this stance, especially with the uncertainty around Omicron.
The timing was not a mistake; everything Powell said, I’m sure, was carefully vetted and thought about. He was sending a message to the market that new coronavirus variants would not derail the Fed’s plan to taper. I would take it as far as to say that I think the Fed wanted the market to do the heavy lifting for them and wanted the market to tighten financial conditions because that may choke off inflation, allowing them a chance to leave rates lower.
It is just a theory, but he will speak again today, and maybe he will walk it back, but I don’t think he will. I think he will have the same stance. He wants the rates higher and wants the dollar strong; he knows this action will slow inflation.
Yields
The yield curve immediately reflected this with the short-end rising and the back-end falling, flattening again. The 30-year minus the 3-month was something to see. It was sitting on a significant level of support and had a broadening wedge pattern present. Both suggested that lower levels for this spread were coming, which would indicate further flattening. That spread could quickly drop to 1%.
S&P 500
The S&P 500 can easily fall to 4365, and nobody at the Fed would likely come to save it. After all, the last 10% gain on the S&P 500 and NASDAQ was just pure stupidity, all driven by multiple expansion. The “real” losses only start after we break 4,365.
For now, 4,550 would be the next significant level of support, and then 4,490 and 4,450. So there would be a lot of room here for things to happen.
NASDAQ
It looks like a head and shoulder pattern was forming in the NDX, and once it breaks 15,990, that pattern will be complete, which could mark a significant top.
Technology ETF
The First Trust Dow Jones Internet Index Fund (NYSE:FDN) fell sharply yesterday, breaking that significant uptrend I noted not long ago. $223 would be the next level to look for; it doesn’t speak highly for technology stocks in general. You can also see that triple top, head-and-shoulders pattern was present as well.
Exxon
Crude oil was slammed again Tuesday, and Exxon Mobil (NYSE:XOM) continued to look very weak here. I still think it fills the gap at $57.50.
Apple
Apple (NASDAQ:AAPL) was up Tuesday on a report out of Digitimes that said that sales of the new iPhones surged in China. I don’t know where Apple should go at this point. At this point, this stock seems like a haven trade more than anything else. I am happy it is up, don’t get me wrong, I have owned it for a long time. But something seemed off here.
Ford
Ford (NYSE:F) is very close to breaking support at $19, which would push the shares back to around $15.55, filling the gap.
