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7/27/22 It’s “Gloomy,” but The Market Loves Powell

News:

Yesterday markets opened lower and fell through the day. All 4 indexes closed the day deep in the red.

  • Nasdaq -1.9%
  • S&P 500 -1.2%
  • Dow Jones -0.7%
  • Russell 2000 -0.7%

Recession fears topped the negative sentiment as the IMF updated its 2023 forecast to “gloomy and more uncertain.”

Banks are raising interest rates, and that hampers growth.

Central Banks from easing to tightening chart

Retail Spending Fears

The weakest sector was Consumer Discretionary (XLY), falling by more than 3%.

  • Shopify (SHOP) fell 14% after announcing a 10% reduction in its global workforce.
  • Walmart (WMT) ended the day down 7.6% after lowering its guidance.
  • Target (TGT) dropped 3.6% in solidarity.
  • Ross Stores (ROST) followed suit with a 5.7% decline.

But there were still bring spots … Utilities (XLU), and Healthcare (XLV) both gained more than 0.5% each.

Good News, Bad Earnings

After the closing bell, more disappointing earnings were met with buying.

  • Alphabet’s (GOOG, GOOGL) earnings were well received. Ad revenue beat expectations, but overall earnings fell short. The stock is up about 4% in pre-market trading.
  • Microsoft (MSFT) missed expectations but is still up about 4% on an upbeat growth forecast.

The Market Tamer

Futures are higher this morning. If they can hold their gains, yesterday’s drop will be erased.

But there are no guarantees…

All eyes are on the Fed today as the FOMC meeting will conclude with a rate hike at 2 pm, and then Fed Chair Powell will take the stage at 2:30 to discuss the decision.

We’re expecting a 0.75% increase.

Just don’t forget … The market loves Powell.

Technicals:

Despite the decline in the indexes yesterday, the VIX has stayed relatively low and in check.


VIX Daily Candles – Chart via thinkorswim

With the downtrend intact, I’m watching the 25 level closely. As long as we can stay below 25, the direction of least resistance remains bullish.

Today I’m not nearly as concerned about the open as I am about the close.

Timing:

While the market will hang on every word that comes from the Fed today. Tomorrow’s GDP report has already become a viral sensation.

In a blog post last week, the White House downplayed GDP expectations.

  • Many claim the Biden Administration is “redefined” the word recession in the blog post.
  • They didn’t, but the optics aren’t great.

Watchlist:

*Low Float
^Open Position

*FAZE has resistance at $13
*HKD is on watch
SMR has resistance at  $13
^CBIO has resistance at $1.80
TH has support at $13
PGY is on watch
SIGA has support at $15
CELH support at $80
NCNA has support at $2
VUZI has support at $7.50

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