A New Focus Has Come Into View Amid Major Cause for Market Concern
After a dull and ugly day of market action, positioning for a key inflation update is the main focus for traders.
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It was a dull day of market action with a negative bias on Wednesday. The indexes continue to look precarious, and they don’t have the big-cap technology or semiconductor names to help them. Nasdaq 100 (QQQ) breadth was abysmal, with only about 15 stocks gaining ground while 85 were in the red.
The Russell 2000 Small Cap Index (IWM) lost around 1.5%, which pushed overall breadth to more than 4 to 1 negative. New 12-month lows were over 250 versus around 125 new 12-month highs. The Magnificent 7 names still showed some relative strength compared to the broader market, but it was an ugly day, with selling accelerating into the close.
The S&P 500 and Nasdaq are still holding above some key support levels, but this market does not have any immediate catalyst and is increasingly nervous about upcoming inflation data, especially since bonds are acting so poorly. There have been two weak bond auctions in a row, which have sent interest rates higher, and that is a major cause for concern.
This market has been saved numerous times when interest rate worries have increased, mainly by the Magnificent 7 names, but technical conditions are different, and there are no big earnings reports to pump up the bulls at this point.
Salesforce (CRM) earnings hit just after the market close, and the stock went down more than 10%. CRM is a Dow Jones Industrial Average (DJIA) component and will weigh on the index Thursday.
The bears have the advantage but right now the main focus is on positioning for inflation news on Friday morning.
Have a good evening. I’ll see you Thursday.
At the time of publication, Rev Shark had no positions in any securities mentioned.
