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Stocks Drop As Canaries Take Flight

By Michael KramerStock MarketsAug 18, 2022 02:12AM ET
www.investing.com/analysis/stocks-drop-as-canaries-take-flight-200628658
Stocks Drop As Canaries Take Flight
By Michael Kramer   |  Aug 18, 2022 02:12AM ET
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The market fell right out of the gate yesterday as rates surged around the globe, following hotter-than-expected CPI data in the UK. The US retail sales number added to the already surging rates because the report seemed pretty strong on the surface. As for the Fed minutes, I think the jury is still out. The headlines which immediately crossed appeared dovish and echoed what Powell said at the FOMC press conference. But reading the minutes suggests rates will get to a certain level and stay there.

Spreads shows that the June Fed Futures rate is trading higher than the February Fed Fund futures rate. Previously the market had seen the Fed starting to cut rates in February, and clearly that is no longer the case.

June Fed Futures Rate
June Fed Futures Rate

Corp Bonds

The LQD also fell yesterday, and it is right on the border as to whether or not it has broken the neckline of a double-top pattern. If it is a double top pattern, which I think it is, it probably has more to drop, potentially to around $111.

LQD Daily Chart
LQD Daily Chart

Financial Conditions

The LQD dropping is essential because it will likely be a powerful sign that financial conditions are starting to tighten again. The IEF/LQD ratio is also trying to break free of that significant downtrend.

IEF/LQD Daily Chart
IEF/LQD Daily Chart

This is important because if financial conditions start to tighten, it will indicate that the rally in stocks is not only over, but depending on how much they tighten, the entire rally we have just witnessed could vanish rather quickly. The biotechs are another key sector to watch because they need access to capital to fund the cost of the development of drugs. The XBI dropped yesterday below the trend line and never recovered it. The RSI is on the cusp of breaking its uptrend too.

XBI Daily Chart
XBI Daily Chart

S&P 500

The S&P 500 futures broke several uptrends yesterday, and they never recovered. But more telling is that the market tried to take out 4,300 on Wednesday, failed, tried again briefly yesterday afternoon, and was rejected, which is very bearish.

S&P 500 Futures Daily Chart
S&P 500 Futures Daily Chart

4,300 is going to be a challenging level to close above this week, especially with options expiration on Friday morning for the index options. Additionally, that served as significant resistance going back to the end of April. Yes, I still see 3,950 coming.

S&P 500 Futures 1-Hour Chart
S&P 500 Futures 1-Hour Chart

ARKK ETF

The ARKK ETF was slammed yesterday and is on the cusp of breaking a significant uptrend. The RSI has already broken its uptrend. Very bearish, in my opinion, once broken.

ARKK ETF Daily Chart
ARKK ETF Daily Chart

Zoom

Zoom Video (NASDAQ:ZM) is also breaking down and falling below its longer-term uptrend. $95 seems like a reasonable level to find support, but given the size of the uptrend, a steeper drop to $88 seems more probable.

Zoom Video Daily Chart
Zoom Video Daily Chart

Netflix

Netflix (NASDAQ:NFLX) has taken longer than expected to turn down than I thought, but the RSI is now rolling over, and the stock seems to be going with it. A drop back to $190 seems like a nice place for this one to settle, in my opinion.

Netflix Inc Daily Chart
Netflix Inc Daily Chart

Original Post

Stocks Drop As Canaries Take Flight
 

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Stocks Drop As Canaries Take Flight

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Comments (10)
King Agamemnon
King_Agamemnon Aug 18, 2022 11:10AM ET
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Price is trading inside of a bullish channel that is still full in tact. Price is stuttering around the 200 DMA but it's fixin to bust through
Andrea Mears
Andrea Mears Aug 18, 2022 8:56AM ET
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thanks Michael
Kris Jay
Kris Jay Aug 18, 2022 8:38AM ET
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i think decent analysis, retail is in big trouble.  Walked into Kolhs to buy a pair of shorts.  $29.99, marked down to $7.99 and then they gave me "kohl's cash" which covered the $7.99 and I gave the balance to woman behind me.   Huge inventory glut.   While Lowes did not report terrible as professional builders still have building orders in place ( but that is vanishing for the next two quarters), i walked by rows of BBQ grilles.   UK, China, Germany all reporting slower growth and higher inflation.   we are not immune.   Fed minutes are clear they are not easing anytime soon.
Mario tragik
Mario tragik Aug 18, 2022 8:02AM ET
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Omg Kramer just stop. You are making a fool of yourself and losing the little credibility you have.
Kris Jay
Kris Jay Aug 18, 2022 8:02AM ET
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you post this every time he posts yet offer no technical or macroeconomic reasons.  the analysis looks pretty thorough and yesterday and probably today the markets will be down.  what news are you counting on that makes you so bullish?
ge Kret
ge Kret Aug 18, 2022 7:10AM ET
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I dont like the other Cramer, but i really have good vibes (Intell) that Russia and the Ukees will make nice real soon. Maybe even in time for the first German snowfall. Do we really believe EU will survive without Russian energy. If those pipelines shut down for 2-3 days in a bitter cold winter the EU will come to a ragging halt. So, when the war is over there will be massive gains to be had. Think of all the reconstructive costs and the cheap North Korean labor. My bet is URI will do well. Yes its all going to happen soon.
Mr Doodl
Mr Doodl Aug 18, 2022 6:50AM ET
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You're really doing fine intermarket analysis. I've learned a lot through your articles. Thanks!
jason xx
jason xx Aug 18, 2022 5:19AM ET
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Looks like 4300 plus is a safe bet for today
jason xx
jason xx Aug 18, 2022 5:18AM ET
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Give it up. We already know you see every little retracement as the start of a major crash of destruction. You are worst then that one hit wonder Michael Burry who called a bear market right once 15 years ago and has been calling for another every week ever since.
Kris Jay
Kris Jay Aug 18, 2022 5:18AM ET
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Kramer is doing chart analysis which looks to be pretty good.   if the technicals looked different i believe he would be reporting that.   so its not just a doom/gloom bearish look, just presenting the facts of how the charts look.  a little different than Burry.
Samer Diab
Samer Diab Aug 18, 2022 3:06AM ET
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noob Michael saying the market is bearish at resistance and pull back lol
Kris Jay
Kris Jay Aug 18, 2022 3:06AM ET
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i dont see anything in the charts which gets me excited to invest in equities.  what is it you see which seems positive and will give momentum to the market to overcome the Feds interest rate hikes?   Fed usually wins on this but give us your insight.
David Beckham
David Beckham Aug 18, 2022 2:23AM ET
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Yeah finally drop again all in short listen to kramer
 
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