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The S&P 500 fell nearly 3% Monday to close at 4,200. Meanwhile, the Q)s fell by 3.7% to close below $325. It was an exciting test for the indexes, whether or not they will be successful in taking out the lows from Feb. 24.
The RSI on the S&P 500 was clearly moving lower and was yet to hit oversold levels; it is currently at 38. Additionally, the advance-decline line made a lower low and seemed to be leading the broader index lower; I suspect the S&P 500 will create a new Intraday low in the coming days and head to support at 4,050.
With oil at $122, the dollar index at 99.25, and wheat trading at its highest prices since 2007, at time of writing, it seemed as if the global economy was heading towards a massive slowdown or recession. Additionally, there was no relief in the overnight funding markets, which means stress continues to build.
Also, the NASDAQ composite looked very weak, as the cumulative number of stocks making new highs minus new lows continued to make lower lows. I still think the signal this sends was that the market’s internals continue to deteriorate, and until this at least shows a sideways movement, the NASDAQ will continue to drop.
Meanwhile, financial conditions continued to tighten as the IEF/LQD ratio increases. It was nearing the December 2018 levels.
The pressures and fears this places on the market resulted in the spread between the 10 and 2-year rates to drop to 22 bps as recession fears rise.
Additionally, the full recession rotation was on full display yesterday as the discretionary, housing, materials, and financial sectors were smashed. The discretionary ETF fell nearly 4.9% on the day, and the XLY dropped below support at $166.
Amazon.com (NASDAQ:AMZN) fell by 5.6% on the day and has given back all of those post-earnings gains, as I expected would happen. I am wondering now if it will make it all the way to $2450 or not.
Lam Research (NASDAQ:LRCX) fell below support at $540, which makes support at $470 critical because the drop is huge after that.
Qualcomm (NASDAQ:QCOM) broke support at $152, and that gap at $140 was in the process of getting filled.
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