MarketSmith powers the charts in this video.
The indexes are still in a pattern of lower highs and lower lows or in other words a downtrend. Until that changes, any talks about positive seasonality are fruitless. The mere fact that stocks are correcting despite bullish seasonality should get your antennas up. There’s something rotten in this market. It tried to rally on October 6th; ran for a few days and just like any other rally since August, it was met with overwhelming supply and sold off again.
I am not sure if the market is still worrying about inflation but the 10-year yield tagged 5% last week. The jump in rates might be a reflection of a bigger bond supply to fund the ever-expanding deficit and worries about the price of oil if the Middle East conflict escalates. The net effect is the same nevertheless. Interest rates are like gravity for stocks.
There are no growth, momentum stocks left to hide in. Anything that held relatively well up until recently, was taken out on a stretcher after TSLA missed earnings estimates. What about GOOGL, META, and MSFT some might ask? I don’t consider them high-momentum, high-growth stocks. They are slower movers and more of a cash-cow play. When cash pays 5% and stocks are falling, people have an easy alternative.
Earnings season has begun. So far, the reactions have been mostly bearish. Regardless of beating or missing estimates, most stocks have been selling off post-earnings. NFLX was a minor exception. The expectations there were too low as the stock was crashing ahead of its report. It gapped near its declining 50dma, where it is trying to hold and build a new base. Tesla missed estimates and it was completely crushed. Next on the deck are Google, Microsoft, Amazon, and Meta. If some of them don’t really surprise to the upside, the indexes are in trouble.
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