Negative technicals build on each other for another down day

Negative technicals build on each other for another down day

The Dow Jones closed down 291 points, or 0.84%. That moved the index below its 50-day moving average.

The Standard & Poor’s 500 was off 0.77% and the NASDAQ Composite fell 1.17%. Both indexes were already below their 50-day moving averages. The 50-day moving average is a key support level for technical analysts. All things being equal, a drop below a support level like this is usually enough to keep stock prices falling until they find the next support level or until something fundamental changes. Stocks had been up so strongly since May that the next support level for the S&P 500 is down at the 200-day moving average, off another 250 points at 4127 from today’s close at 4370. I’d note that to my eye this would still leave stocks in a trading range of 4,000 to 4,500. No nothing to panic about if that’s the extent of the decline. But all things aren’t equal. The global financial markets are coping with a big increase in bond yields. The yield on the 10-year Treasury rose to 4.28%. That was up another 3 basis points today (and an increase of 47 basis points in the last month.)

Please watch my new YouTube video: Everybody (Well, Almost Everybody) Hates 2023

Please watch my new YouTube video: Everybody (Well, Almost Everybody) Hates 2023

(Almost) everybody hates 2023. We’re just four days into 2023 and we’ve already had some negative reporting come from the IMF, (International Monetary Fund) stating that a third of the world will likely be in recession in 2023. The US may escape the recession, but just barely, with the Fed projecting a .5% GDP growth rate for 2023. All this bad news is actually good news because it means we may finally see a bottom. Once we can remove the “almost” and definitively say EVERYONE hates 2023, that’s when we can get back to investing. I think we’re about six months away from that. The S&P was at 3816 on January 3, inching closer to the October low of 3583 and the June low of 3674. If we get back down to those lows, or lower, I’d say it’s time to start putting your money back to work.

Please Watch My New YouTube Video: Where Do We Go From Here?

Please Watch My New YouTube Video: Where Do We Go From Here?

Today I posted my two-hundred-and-seventeenth YouTube video: Where Do We Go From Here?

Today’s topic: Where Do We Go From Here? We got better-than-expected CPI inflation numbers yesterday. Economists were expecting a 7.3% headline annual rate and we got 7.1%. For the core rate, expectations were at 6.1% and we got 6.0%. In the hour following the CPI report, the S&P 500 jumped about 1.6%. If the Fed announces the expected 50 basis point rate hike and doesn’t shock the market with unexpected bad news, we’ll likely see a traditional Santa Claus rally. The question of the Fed’s Dot Plot projections remains my long-term concern–as we try to understand how long the Fed will continue to raise rates and when we are likely to hit the Fed’s goal of a 2% inflation rate. We’re currently at about 7% and I expect getting down to 5% or so will be pretty painless. Beyond that, How we go from 4-5% to 2%? could be the crucial question for 2023. Until that 2% is in view for the Fed, I don’t think the central bank will back off completely. We’ll see if this Santa Claus rally can stay convincingly above 4,000 in the S&P 500. If we do move above that level, I think we can expect the rally to continue until about February or maybe even early March. And then we’re likely to see a drop in stocks because of a lower growth rate for corporate earnings and continued inflation fighting from the Fed.

Negative technicals build on each other for another down day

It’s deja vu all over again: Stocks struggle at technical trend lines

At 2:20 p.m. New York time today, December 1, the Standard & Poor’s 500 traded at 4074. That’s just slightly above the 200-day moving average for the index of 4048. Yesterday, the S&P 500 closed at 4080. The 200-day-moving average was at 4050. Yep, once again, we’re seeing a struggle to break through technical resistance near the 4,000 level.

Stocks soar, bonds fall on worse than expected CPI inflation news

Stocks soar, bonds fall on worse than expected CPI inflation news

Headline Consumer Price Index inflation rose at an 8.2% annual rate in September, the Bureau of Labor Statistics reported this morning. Month-to-month inflation rose by 0.4% on a seasonally adjusted basis. The month-to-month increase was just 0.1% in August. Core inflation, which strips out volatile food and energy prices, rose 0.6% from August and ran at a 6.6% annual rate in September. All these numbers indicate that inflation remains elevated and is proving stubbornly resistant to increases in interest rates from the Federal Reserve intended to bring inflation back toward the central bank’s target of a 2% annual inflation rate. But After initially tumbling on the news–the NASDAQ Composite, for example, was down 3% at the open–stocks have staged a strong rally with the Standard & Poor’s 500 up 2.26% as of 1:30 New York time and the NASDAQ Composite ahead 1.86%. Bond prices, on the other hand, are down and bond yields are up.

This  Bear Market rally has some legs: Stocks don’t want to fall–even on really bad economic news from China

This Bear Market rally has some legs: Stocks don’t want to fall–even on really bad economic news from China

Overnight China reported really negative growth numbers with industrial production, fixed asset investment, and consumer spending all growing at rates well below projections. Economists on Wall Street (and its equivalent in Tokyo, etc.) issued new forecasts for economic growth in China of 4% or 3.5% or 3%. Far below the 5% unofficial growth target from Beijing. But U.S. stocks initially dipped on the news but by noon the major indexes had moved into the black. The Standard & Poor’s 500 closed up 0.33% for the day. The Dow Jones Industrial Average ended 0.49% higher. The NASDAQ Co opposite gained 040% and the NASDAQ 100 added 0.75%. Only the Russell 2000 small-cap index ended the day down and that by just 0.12%.Some days, and I think this is one of them, you can tell a lot about market direction by how stocks react to bad news.

Special Report: 5 Picks and 5 Hedges for a Falling Market–today’s new installment “What happens when a momentum market loses its momentum?” with my #5 stock pick

Special Report: 5 Picks and 5 Hedges for a Falling Market–today’s new installment “What happens when a momentum market loses its momentum?” with my #5 stock pick

Before I get around to making the fifth and final stock pick in this Special Report: 5 picks and 5 Hedges for a Falling Market, let me take a moment to bring my survey of market conditions up to date. Where we are now has a strong influence on what stocks to own and buy and on how to hedge against any downturn. The question I’ve asked in the headline to this post is the critical one now: What happens when a momentum market loses its momentum? I think investors and traders can answer that question by just looking around them.