Monday’s gargantuan reversal after the NASDAQ dropped a whopping 14.5% in less than 7 days still holds sway. The NASDAQ had dropped over 19% to Monday’s low. We can never predict reversals but as always, stated mid-day Monday that after such a harrowing drop, with bearishness spiking big time, there was that opportunity. Since, those lows did not get taken out. Yesterday’s action? Not so great with another sell-off into the close, filling some of Monday’s reversal. This morning, we come into (guess the gap) a good gap to the upside. To tell you how fragile things are, after MICROSOFT numbers, futures were again smoked as MICROSOFT was hit hard. After better guidance, everything turned. A stronger Europe has the market gapping up. MSFT is gapping up just above the 200 day moving average and is still down mid-teens from the recent highs. And that is a stronger name.
We do believe a good chance that Monday’s reversal has carved out A low which will not be taken out right now. Notice we did not say THE low. We will need to see more cards come out of the deck. Just remember, REAL BEAR MARKETS USUALLY HAVE 3 LEGS TO THE DOWNSIDE. Just remember, BEAR MARKET RALLIES ARE SHARP, QUICK, MAKE YOU FEEL GOOD, SUCK YOU IN AND BURY YOU SOON AFTER. Let’s hope this is not one of them.
Pretty much the only bullish areas in up-trends are ENERGY as oil prices continue higher and STAPLES as they are quite defensive.. There is a smattering of other things in shape like some FINANCIAL/INSURANCE and COMMODITY names. There is not much after that.
We have Mr. Powell today. We have no clue what comes from him as they tease, tease, change, change and then do their blah blah blah. All this man has cared about since DEC 2018 is markets but now has to care about the inflation he has caused.
Earnings season. Many biggies to report. APPLE, TESLA, BLACKSTONE,MASTERCARD, VISA, MCDONALDS, CATERPILLAR to just name a few of the many this week ahead.
We are in the end of month window dressing period but right now, not sure what they can window dress and of course, window dressing is illegal so it does not happen.
Russia/Ukraine. Our guess is there is nothing imminent because most forget the Olympics from China is soon. Mr. Putin will not dare hurt his Communist buddy Xi Jinping by taking the Olympics off the front page. We mean this. Would be quite surprising if he does act before.
A lot of the bombed out names up 3-5% pre-market. Remember, a stock that dropped 50%, rallying up 20% is still down down 40% and still in a bear market. As far as the gap, we would be surprised if it reverses back down even with Powell yapping but in this wildness, all possibilities on the table. It is a “duh” statement to say a reversal today would not augur well..