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Stocks Pop Then Drop Following A Hawkish U.S. Fed

By Michael KramerStock MarketsSep 22, 2022 03:47AM ET
www.investing.com/analysis/stocks-pop-then-drop-following-a-hawkish-us-fed-200630147
Stocks Pop Then Drop Following A Hawkish U.S. Fed
By Michael Kramer   |  Sep 22, 2022 03:47AM ET
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FDX
+2.47%
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QQQ
+4.56%
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COF
+1.14%
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VIX
-0.05%
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Stocks were up yesterday to start the day, rising by around 70 bps, then after the Fed announcement came, they dropped sharply. Then on schedule, around 2:30, the implied volatility melt started helping to bring stock higher and to their intraday high, up around 1.3%. But the rally didn’t last, as sellers emerged and the implied volatility rip faded. The index gave back all of the gains, finishing at the lows of the day down around 1.7% and closing below support at 3790.

As I have noted for some time, I think the S&P 500 and the Nasdaq are heading for new lows, and yesterday’s Fed meeting seemed to confirm that is likely where stocks are heading. The dot plots made it very clear that the Fed will not be cutting rates anytime soon and is front-loading hikes, with the potential for 125 bps of hikes between now and year-end, and there are only two meetings left.

S&P 500

The break of support at 3,790 could be significant because the next gap that needs to be filled for the S&P 500 comes at around 3,675, which is right back at the June lows. Additionally, the broadening wedge is in the middle of playing out, which would also indicate that the S&P 500 could be heading to new lows.

SPX Hourly Chart
SPX Hourly Chart

Nasdaq

For the QQQ ETF, that are no open gaps from what I can see, and if real and nominal rates are heading higher, then the QQQ should continue to head lower. I think the QQQ will also be heading to new lows and undercutting the $269 level.

QQQ Hourly Chart
QQQ Hourly Chart

VIX

The VIX options expiration took place yesterday morning, and the more hawkish than expected FOMC projections sent the VIX higher. This 28 level is enormous and has been strong resistance for some time. But that was primarily due to opex, and now that opex has passed, the VIX should be able to move more freely, so a spike higher from here would not be surprising.

VIX 4-Hr Chart
VIX 4-Hr Chart

2-Year Treasuries

Additionally, based on the FOMC projections, I think the 2-year rate is heading to 4.25%, if not even higher.

US 2-Yr Rate Chart
US 2-Yr Rate Chart

Zoom

Zoom Video (NASDAQ:ZM) made another new low yesterday, and the break of support at $76.50 opens the door for a drop to $70.

Zoom 4-Hr Chart
Zoom 4-Hr Chart

FedEx

FedEx (NYSE:FDX) continues to drop following results, and now it is on the cusp of filling that gap from July 2020, down at $139.

FedEx 4-Hr Chart
FedEx 4-Hr Chart

Capital One

I had seen some bearish option betting earlier this week in Capital One (NYSE:COF), and the stock looks like it could fall off a cliff at this price, with $80 being the next major support level to come.

Capital One 4-Hr Chart
Capital One 4-Hr Chart

Original Post

Stocks Pop Then Drop Following A Hawkish U.S. Fed
 

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Stocks Pop Then Drop Following A Hawkish U.S. Fed

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Comments (9)
Dweeptaru Das
Dweeptaru Das Sep 22, 2022 11:11AM ET
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let's see today the markets will end in green
Casador Del Oso
Casador Del Oso Sep 22, 2022 9:39AM ET
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Thank you.
Mario tragik
Mario tragik Sep 22, 2022 9:16AM ET
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In all seriousness, I only follow kramer to get the bear thesis and some of his price levels for support or resistance. but that is just one side of the coin, if you only follow him and blindly like a perma bear you probably lost a lot the last 3 years. kramer followers, understand you cannot anchor emotionally to one side. I mean this guy barely got it right SOMETIMES this year letcthat sink in
Tomas No
Tomas No Sep 22, 2022 8:06AM ET
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This guy is an oracle. Only that whatever he says - do the opposite. This way more than 75% of the times you'll be right :)
Kris Jay
Kris Jay Sep 22, 2022 8:00AM ET
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Thank you.   Your chart analysis has helped me with 18% return this year.  I follow the three Michaels - Burry, Wilson and Kramer.
Mario tragik
Mario tragik Sep 22, 2022 8:00AM ET
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18% return this year , -30% last couple of years. lol at least he is making you recover something. you perma bears are so funny
Dweeptaru Das
Dweeptaru Das Sep 22, 2022 8:00AM ET
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Jimmy Richardson
Jimmy Richardson Sep 22, 2022 6:13AM ET
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2 articles before this you said markets could be headed higher...smh is it up or down it's just money
Dweeptaru Das
Dweeptaru Das Sep 22, 2022 6:13AM ET
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actually markets are bound upward. whatever be the situations, they are all short lived
Mario tragik
Mario tragik Sep 22, 2022 6:10AM ET
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you are in for a surprise. will be back this afternoon to tell you how you were wrong like most of the time.
David Bud
David Bud Sep 22, 2022 6:10AM ET
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lol epic fail again
Jeff
Jeff Sep 22, 2022 5:08AM ET
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Appreciate your work! Thank you!
Mohd Izhar Muslim
Mohd Izhar Muslim Sep 22, 2022 3:55AM ET
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Thank you for sharing the article 💯
 
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