The Biggest Problem This Market Is Facing
The market has held up well so far as players have put their faith in the Fed. However, the wrong data can change things quickly.
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It was the third straight day of messy action on Thursday, but this time, the dip-buyers didn’t make much of an effort. Breadth was very poor, with around 2,500 gainers to 6,900 decliners. New 12-month highs continued to contract and were around 2,250.
Much of the weakness was covered by Nvidia NVDA, which jumped more than 3%. Meta Platforms META was also nicely in the green, but the other Magnificent Seven names struggled with the Nasdaq 100 QQQ losing 0.15%. What was most notable was the terrible breadth. Only about 20 of the 101 stocks in the QQQ finished in positive territory.
The biggest problem that the market is facing is that bonds are weak, which means that interest rates are rising. The 20+ Year Treasury Bond Fund TLT fell 0.9% and is now under its 50-day simple moving average, testing the lows hit in late August.
A stronger-than-expected ISM Services number received a positive response initially because it raised hopes of a soft economic landing, but after some contemplation, there were concerns that it may be a sign of inflationary pressure.
The jobs report on Friday morning will add some more data to the debate over the potential for a soft landing or a rebound in inflation. In general, the market has held up well recently because market players have set aside their economic worries and put their faith in the Fed. So far, the Fed isn’t disappointing, but the wrong data can change things quickly.
It continues to be a difficult trading market, and we still have to wait a couple of weeks before earnings shake things up. Stay patient.
Have a good evening. I’ll see you Friday.
At the time of publication, Rev Shark was long NVDA.
