Stocks Drop As The U.S. Fed Provides A Hawkish Surprise
Michael Kramer | Nov 03, 2022 16:29
Stocks dropped yesterday after the Fed failed to deliver the dovish pivot the market was waiting on. Not only did the Fed not deliver on the dovish pivot, but it was also made clear that rates would have to go higher than previously thought, and that the runway for a soft landing was narrower.
So in classic form, the S&P 500 dropped like a stone, closing around 3,750. That is the dividing line for today. If the 3,750 level breaks, the index could fall back to 3,640 and potentially back to the gap of around 3,580. The only thing lifting the market was hope and systematic flows; both have vanished.
The key to what happens from here will return to the dollar and yields. Equities will be pressured lower if the dollar keeps strengthening and yields keep increasing. Equities will likely begin making new lows if the dollar and yields start making new highs.
h2 Rates/h2The 2-year is now back to 4.6%, and as I have been saying, I think it is going higher and potentially as high as 5%. That is where the Fed fund futures are seeing the overnight rate around by May 2023. If the overnight rate is going to 5%, then the 2-year should rise to about 5%, and a bull flag projection suggests 4.92%.
I think the QQQ is already broken after falling through support yesterday at $269. It is probably on its way to filling the gap at $260.
Advanced Micro Devices (NASDAQ:AMD) ended up finishing the day lower yesterday by almost 2%, despite rising by nearly 5% at the start of the day. The question is whether there is more follow-through. If the shares can break support at $58.50, then a retest of the lows at $55.50 seems possible, which opens the door to the shares potentially falling back to $49.
Get The App
Given that horrible revenue guidance, I thought Qualcomm (NASDAQ:QCOM) would be down much more in after hours tradubg. The opportunity for the stock to fill that gap at $92 just got closer, given the terrible outlook. The falling RSI would suggest that the stock makes its way down to that gap.
Intuit (NASDAQ:INTU) appears to be forming a Head And Shoulders pattern, with the neckline around $385. The news from Intuit regarding its Credit Karma unit started this recent move down, and even the earnings pre-announcement didn’t help today. The shares struggled to rally even before the FOMC. A break of $385 could lead to a further decline to around $325.
Finally, gold looks like it is getting ready to break lower, and with the dollar and rates ripping, I do not see how gold doesn’t fall. Support for gold comes at approximately $1,565.
Original Post
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.