Stocks dropped yesterday, with the S&P 500 falling by roughly 80 bps, while bond yields rose sharply, and the dollar spiked. The moves came after the CPI report showed that inflation was hotter than expected, while real wages fell.
It is not an ideal scenario, especially if wages can’t keep pace with inflation. The market is now pricing in nearly six rate hikes by the end of 2023. Given this, I don’t think the selling is done, and I think this whole rally goes from supernova to dwarf star, with all the gains basically disappearing.
The dollar surged over resistance at 94.60, with it is now potentially on its way to around 96.30.
S&P 500
The S&P 500 fell pretty sharply around 1 PM, which came after the 30-year auction, and around the time of the dollar’s breakout. Additionally, it was around the time that rumors were circulating that Evergrande (OTC:EGRNY) missed a bond payment. Then later in the day, the news was that Evergrande made the payment, and the market lifted some off of its lows.
Now it isn’t apparent what led to the sell-off because of these two stories moving around. But it seems clear to me that once the dollar broke out and cleared resistance around 94.60 and took off, the S&P 500 sell-off started to accelerate. As a result, I don’t think the Evergrande payment story is going to reverse the sell-off.
I still happen to think that the S&P 500 is heading lower from here and potentially back to around 4,440 over the very short term.
Disney
Disney (NYSE:DIS) is getting hit relatively hard after its Disney+ subscriber numbers missed expectations. For this stock right now, it’s all about support at $168. If that holds, it can trade sideways; if its support breaks, there is a gap at $155 that needs filling. I have been in the camp that the gap gets filled.
AMD
Advanced Micro Devices (NASDAQ:AMD) was smoked yesterday, falling 6% to $139.90. The gamma squeeze appears to be fading, and that means the stock isn’t finished falling yet. I’m still looking for $135.
NVIDIA
NVIDIA (NASDAQ:NVDA) also fell 4% yesterday, and it too is having a gamma squeeze reversed. NVIDIA has a giant gap at $265 that needs to be filled, and I expect that will happen soon.
Netflix
Netflix (NASDAQ:NFLX) has a giant rising wedge pattern going back to 2018, and it looks like the RSI uptrend is pretty close to breaking. A pullback to $580 would leave the stock on the cusp of a significant move lower.
Exxon
Finally, Exxon's (NYSE:XOM) stock looks like it may be ready to drop back to $57.50. Not only that, but open interest levels dropped dramatically across several series of calls and expiration dates.
