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9/14/22 China Tensions & Inflation Drive Bloody Tuesday

News:

No buyers showed up on Tuesday.

In the morning, the CPI inflation reading came in hotter than expected, and the selling began.

chart showing 10 years of CPI inflation data
Chart by the U.S. Bureau of Labor Statistics

Here’s what you need to know:

  • Inflation rose 0.1% month over month.
  • And 8.5% year over year.
    • It’s the second highest reading in 4 decades
    • June’s was the highest at 9.1%.
  • The market is now factoring in the possibility of a 1.0% rate hike from the Fed next week.
  • Today a 0.75% increase is considered the minimum

Then the market got kicked while it was down…

Photo of U.S. & China flags fly in the wind
Photo from Getty Images

In the afternoon, Reuters broke a story: The US is considering a “sanctions package against China.”

  • Tensions over Taiwan continue to escalate.
  • According to the report, talks are in “early stages.”
  • Reuters cites only “sources familiar with the discussions.” 

Tuesday belonged squarely to the bears.

All four indexes dropped like rocks … It was the Nasdaq’s worst day in more than two years.

  • Dow Jones -3.9%
  • Nasdaq -5.2%
  • S&P 500 -4.3%
  • Russell 2000 -3.9%

Sector Round-Up

All 11 sectors finished much lower.

The smallest loser was…

  • Energy (XLE) -2.5%

At the bottom…

  • Communications (XLC) -5.5%, which, as we pointed out yesterday, was already the weakest sector in the market.

Technicals:

The S&P 500 closed at its rising support level.

The line on this chart was drawn last week and is being tested again.

SPY chart showing rising support
SPY Daily Candles – Chart via thinkorswim

When the market reaches a critical support level, it’s often a buying opportunity. But keep in mind that support and resistance levels get weaker each time they are tested.

Our top indicators aren’t united at the moment.

Timing:

This week is the year’s third triple witching. Watch for added volatility as Friday approaches, especially with the put-to-call ratio out of whack.

All eyes are now looking to next week’s FOMC meeting.

  • It begins Tuesday, September 20
  • Concludes on the 21st
  • The new rate drops at 2 pm
  • Fed Chair Powell will take the stage at 2:30.

Watchlist:

^Open Position

IMRA support at $2
ETNB is on watch
MNTK support at $19
DCPH support at $18
RYTM resistance at $27
CRBU support at $12
AGIO support at $32
RVNC on watch
PNT resistance at $10.50
SGML support at $25
SEEL support at $1.35
^GEO support at $8\
ARDX support at $1.40
PGEN support at $2.60
TCRT on watch
^GERN support at $2.80
TAL support at $5, resistance at $6

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