Summary: Brainard turns hawkish and sucks the energy out of the market. Equities dropped as yields soared.
Notes
Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.
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Tuesday, April 5, 2022
Facts: -2.26%, Volume higher, Closing Range: 11%, Body: 86% Red
Good: Nothing
Bad: Lower high, lower low, closing range
Highs/Lows: Lower high, Lower low
Candle: Mostly red body, tiny upper and lower wicks
Advance/Decline: 0.24, 4 declining for every advancing stock
Indexes: SPX (-1.26%), DJI (-0.80%), RUT (-2.36%), VIX (+13.25%)
Sector List: Utilities (XLU +0.63%) and Health (XLV +0.21%) at the top. Technology (XLK -2.11%) and Consumer Discretionary (XLY -2.34%) at the bottom.
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Market Overview
Brainard turns hawkish and sucks the energy out of the market. Equities dropped as yields soared.
The Nasdaq declined by -2.26%. Volume was higher than the previous day. The lower high and lower low as well as the low closing range all mark a bearish day of distribution. The red body covers 86% of the candle and leaves behind an 11% closing range. There were more than four declining stocks for every advancing stock.
The Russell 2000 (RUT) declined the most, losing -2.36$. The S&P 500 (SPX) dropped by -1.26%. The Dow Jones Industrial Average lost -0.80%. The VIX Volatility Index rose +13.25%.
Only four of the eleven S&P 500 (SPX) sectors, all defensive sectors. Utilities (XLU +0.63%) and Health (XLV +0.21%) were the top gainers. Technology (XLK -2.11%) and Consumer Discretionary (XLY -2.34%) had the most significant declines.
Services and non-Manufacturing PMI indexes were slightly lower than expected. The trade balance also showed a more negative picture than forecast, but not too far off the expectation.
The US Dollar index (DXY) rose by +0.50%. US 30y, 10y, and 2y Treasury Yields all rose but the yield curve continues to recover from the temporary inversion last week. High Yield (HYG) and Investment Grade (LQD) Corporate Bond prices declined sharply. Brent Oil is hovering near $105 a barrel.
The put/call ratio (PCCE) rose to 0.753. The CNN Fear & Greed index moved toward the Fear range but remains close to Neutral.
All big six meg-caps declined. Nvidia (NVDA) declined by -5.22%, closing below its 21d EMA. Amazon (AMZN) lost -2.55%, dropping back below its 200d MA. The other four remain above their moving average lines but are showing the same volatility as the rest of the market.
United Health (UNH) was at the top of the mega-cap list with a +1.52% gain. Alibaba (BABA) was at the bottom of the list, declining by -5.53% today. Alibaba topped the list yesterday.
Only two stocks in the Daily Update Growth List, RH (RH) and Twitter (TWTR) ended the day with gains. RH gained +7.10% after Josh Brown of Ritholtz doubled his position in the company. Beyond Meat (BYND) was at the bottom of the list, dropping by -7.85%. The stock had plenty of company as more than half of the list declined more than 5%.
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Looking ahead
After the market opens on Wednesday, we'll get the weekly update on Crude Oil Inventories. The Meeting Minutes from the most recent FOMC gathering will be released in the afternoon, giving investors more detail into the conversations around inflation and the proposed Fed response.
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Trends, Support, and Resistance
The Nasdaq lost support at 14,500 on the economic data and then descended further after Brainard's public comments on inflation and the Fed response.
If the index is to return to the trend line from the 3/14 low, it would require a +4.34% advance. That is not likely to happen in just one day.
The five-day trend line is pointing to a +0.26% advance for Wednesday.
If the one-day trend line continues, the index will test the 21d EMA with a possible decline of -1.51%.
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Wrap-up
Why did Lael Brainard's hawkish views cause so much turmoil in the markets? She's considered one of the most dovish of the Fed governors. So it was a big deal when she said the Fed should draw down the balance sheet at a rapid pace. It also adds more evidence to the mix that the Fed will also raise interest rates by 50 basis points next month, compared to the 25 basis points last month.
Stay healthy and trade safe!
Notes
Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Tuesday, April 5, 2022
Facts: -2.26%, Volume higher, Closing Range: 11%, Body: 86% Red
Good: Nothing
Bad: Lower high, lower low, closing range
Highs/Lows: Lower high, Lower low
Candle: Mostly red body, tiny upper and lower wicks
Advance/Decline: 0.24, 4 declining for every advancing stock
Indexes: SPX (-1.26%), DJI (-0.80%), RUT (-2.36%), VIX (+13.25%)
Sector List: Utilities (XLU +0.63%) and Health (XLV +0.21%) at the top. Technology (XLK -2.11%) and Consumer Discretionary (XLY -2.34%) at the bottom.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
Brainard turns hawkish and sucks the energy out of the market. Equities dropped as yields soared.
The Nasdaq declined by -2.26%. Volume was higher than the previous day. The lower high and lower low as well as the low closing range all mark a bearish day of distribution. The red body covers 86% of the candle and leaves behind an 11% closing range. There were more than four declining stocks for every advancing stock.
The Russell 2000 (RUT) declined the most, losing -2.36$. The S&P 500 (SPX) dropped by -1.26%. The Dow Jones Industrial Average lost -0.80%. The VIX Volatility Index rose +13.25%.
Only four of the eleven S&P 500 (SPX) sectors, all defensive sectors. Utilities (XLU +0.63%) and Health (XLV +0.21%) were the top gainers. Technology (XLK -2.11%) and Consumer Discretionary (XLY -2.34%) had the most significant declines.
Services and non-Manufacturing PMI indexes were slightly lower than expected. The trade balance also showed a more negative picture than forecast, but not too far off the expectation.
The US Dollar index (DXY) rose by +0.50%. US 30y, 10y, and 2y Treasury Yields all rose but the yield curve continues to recover from the temporary inversion last week. High Yield (HYG) and Investment Grade (LQD) Corporate Bond prices declined sharply. Brent Oil is hovering near $105 a barrel.
The put/call ratio (PCCE) rose to 0.753. The CNN Fear & Greed index moved toward the Fear range but remains close to Neutral.
All big six meg-caps declined. Nvidia (NVDA) declined by -5.22%, closing below its 21d EMA. Amazon (AMZN) lost -2.55%, dropping back below its 200d MA. The other four remain above their moving average lines but are showing the same volatility as the rest of the market.
United Health (UNH) was at the top of the mega-cap list with a +1.52% gain. Alibaba (BABA) was at the bottom of the list, declining by -5.53% today. Alibaba topped the list yesterday.
Only two stocks in the Daily Update Growth List, RH (RH) and Twitter (TWTR) ended the day with gains. RH gained +7.10% after Josh Brown of Ritholtz doubled his position in the company. Beyond Meat (BYND) was at the bottom of the list, dropping by -7.85%. The stock had plenty of company as more than half of the list declined more than 5%.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
After the market opens on Wednesday, we'll get the weekly update on Crude Oil Inventories. The Meeting Minutes from the most recent FOMC gathering will be released in the afternoon, giving investors more detail into the conversations around inflation and the proposed Fed response.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support, and Resistance
The Nasdaq lost support at 14,500 on the economic data and then descended further after Brainard's public comments on inflation and the Fed response.
If the index is to return to the trend line from the 3/14 low, it would require a +4.34% advance. That is not likely to happen in just one day.
The five-day trend line is pointing to a +0.26% advance for Wednesday.
If the one-day trend line continues, the index will test the 21d EMA with a possible decline of -1.51%.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
Why did Lael Brainard's hawkish views cause so much turmoil in the markets? She's considered one of the most dovish of the Fed governors. So it was a big deal when she said the Fed should draw down the balance sheet at a rapid pace. It also adds more evidence to the mix that the Fed will also raise interest rates by 50 basis points next month, compared to the 25 basis points last month.
Stay healthy and trade safe!
