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Stocks Finish Flat As Financial Conditions Tighten Further

By Michael KramerStock MarketsJun 23, 2022 12:37AM ET
www.investing.com/analysis/stocks-finish-flat-as-financial-conditions-tighten-further-200626158
Stocks Finish Flat As Financial Conditions Tighten Further
By Michael Kramer   |  Jun 23, 2022 12:37AM ET
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The S&P 500 finished the day lower by 13 bps. It was a volatile day, with the market dropping sharply to open and rallying sharply, only to close flat.

There was a strong sell-off at the open, with the S&P 500 falling to around 3,720 and rebounding nearly 80 points to 3,800. But in the end, it closed at approximately 3,760.

Maybe it was due to Powell’s testimony; I’m not sure. He had nothing new to say, which may have been reason enough to rally.

I don’t think anything changed yesterday, so I will stick with my view that the S&P 500 retraces to under 3,700 in the next couple of sessions.

S&P 500, 5-Min Chart
S&P 500, 5-Min Chart

Financial Conditions

As measured by the iShares 7-10 Year Treasury Bond ETF (NASDAQ:IEF)/iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSE:LQD) ratio, financial conditions tightened again Wednesday and made a new closing high for the cycle.

So typically, when this ratio rises, it tends to coincide with the S&P 500 dropping. So either the ratio is playing catch up to the S&P 500, or the S&P 500 has a new low coming very soon.

Thursday will tell us a lot.

I inverted the IEF/LQD ratio on the chart below to make the relationship with the S&P 500 easier to see.

IEF/LQD Daily Chart
IEF/LQD Daily Chart

Exxon

Yesterday, I wrote up a story about Exxon Mobil (NYSE:XOM) and a potential move lower in the stock. A bearish megaphone has formed, which could see the stock fall first to around $83, but I think there is potential for $70.

Exxon Mobil Corp Daily Chart
Exxon Mobil Corp Daily Chart

Freeport

Copper prices have been dropping, and Wednesday, Freeport-McMoran Copper & Gold (NYSE:FCX) also fell by nearly 8%.

It is a big spot for Freeport on the chart, with the stock hovering around technical support at $30. Where copper goes, Freeport will follow. But if Freeport drops below $30, there is a long way for this to fall, potentially to as low as $26.

Freeport Daily Chart
Freeport Daily Chart

Copper

Copper is now trading below $4 and appears to be heading to around $3.70, which is the next big support level.

Copper Futures Daily Chart
Copper Futures Daily Chart

Taiwan Semi

As noted over the weekend, copper seems to be following Taiwan Semiconductor Manufacturing (NYSE:TSM) lower. So it probably isn’t a good sign that Taiwan Semi is back to trading at its recent lows. This is, of course, also bad news for Freeport.

Copper Futures/TSM Daily Chart
Copper Futures/TSM Daily Chart

Original Post

Stocks Finish Flat As Financial Conditions Tighten Further
 

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Stocks Finish Flat As Financial Conditions Tighten Further

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Comments (1)
Al Ose
Al Ose Jun 23, 2022 6:45AM ET
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As we know, Indexes and futures have been all over the map the last 2 days. Its a show! I guess pro day traders must love it
 
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