Speak about being a celebration pooper. Fed Chair Powell’s feedback at present that bringing down costs “is more likely to require a sustained interval of below-trend progress and a rise in unemployment” introduced the markets to its knees. The remarks elevated fears of a protracted rate-hike cycle which, in flip, pushed shares sharply decrease.
Hardest hit had been Know-how shares, which fell 4.3% at present, a loss that underscored the lack of this sector to interrupt again above resistance at its 200-day transferring common final week.
DAILY CHART OF TECHNOLOGY SECTOR:
In a rising-rate surroundings, Progress shares akin to Know-how, in addition to Shopper Discretionary (to call simply two areas), stand to lose essentially the most, as larger charges scale back the worth of future earnings. The chart under reveals the Tech-heavy Nasdaq’s efficiency as rates of interest ebb and move and fairly clearly, larger yields are a unfavourable.
DAILY CHART OF NASDAQ WITH YIELD OF 10-YEAR TREASURY OVERLAY
This week’s pullback has pushed the S&P 500 under a key stage and, with its momentum indicators in unfavourable territory on the every day chart, the near-term outlook for the markets doesn’t look good. Subscribers to my MEM Edge Report had been alerted to this chance in current stories, as we trimmed shares from our purchase record and highlighted trade group charts that had been weakening.
Powell’s clear message at present that companies and households might really feel some ache within the coming months was fairly completely different from his usually extra balanced remarks. The tone elevated nervousness amongst buyers and induced a pointy uptick within the volatility index ($VIX) — also called the “worry index.” That is one other unfavourable for the markets.
DAILY CHART OF VOLATILITY INDEX (VIX)
As for the prospects for the markets going ahead, you’ll be able to entry my Monday Alert Report from this week, the place I share key areas of resistance, in addition to worth motion that may put the broader markets again into an uptrend. Additionally included are marked-up charts of each the Semiconductor and Software program teams, with detailed insights into these areas. My Alert Studies aren’t as detailed as my weekly MEM Edge Studies, so make certain and take a 4-week trial at a nominal charge so you’ll be able to keep away from losses and protect capital amid a weakened market backdrop.
On this week’s version of The MEM Edge, now obtainable to observe on demand at StockChartsTV.com and the StockCharts YouTube channel, I share a key stage that was damaged within the S&P 500 in addition to what to be looking out for going ahead. I additionally evaluation shares which might be bucking the downtrend and what’s driving them larger.
Warmly,
Mary Ellen McGonagle, MEM Funding Analysis
Mary Ellen McGonagle is an expert investing advisor and the president of MEM Funding Analysis. After eight years of engaged on Wall Avenue, Ms. McGonagle left to turn out to be a talented inventory analyst, working with William O’Neill in figuring out wholesome shares with potential to take off. She has labored with shoppers that span the globe, together with large names like Constancy Asset Administration, Morgan Stanley, Merrill Lynch and Oppenheimer.
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