Daily Market Update for 3/16

Original Chart

Notes

Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.

Wednesday, March 16, 2022

Facts: +3.77%, Volume higher, Closing Range: 99%, Body: 71% Green
Good: Closing range of 99%, higher volume
Bad: Nothing
Highs/Lows: Higher high, Higher low
Candle: Gap up, large green body over long lower wick, not upper wick
Advance/Decline: 3.34, more than three advancing for every declining stock
Indexes:SPX (+2.24%), DJI (+1.55%), RUT (+3.14%), VIX (-10.59%)
Sector List: Consumer Discretionary ( XLY +3.41%) and Technology ( XLK +3.25%) at the top. Utilities ( XLU -0.18%) and Energy ( XLE -0.46%) at the bottom.

Market Overview

The Fed brought no new surprises today, but the initial reaction caused a dip in indexes that reversed into a late after rally higher. Chinese stocks took off after the government pledged to support the stock market and not penalize companies with foreign listings.

The Nasdaq closed +3.77% higher for the day. The index opened with a gap up which faded as the Fed interest rate news approached. When the news hit, the Nasdaq fell -1.92% in about 30 minutes but then reversed and climbed +3.42% from the intraday low. The wild session created a long lower wick that sites below a 71% green body and a 99% closing range. There were more than three advancing stocks for every declining stock.

The Russell 2000 (RUT) advance +3.14%. The S&P 500 (SPX) climbed by +2.24%. The Dow Jones Industrial Average (DJI) rose by +1.55%. The VIXVolatility Index fell -10.59%.

Nine of the eleven S&P 500 (SPX) sectors gained for the day. Growth sectors led with Consumer Discretionary ( XLY +3.41%) and Technology ( XLK +3.25%) at the top of the list. Utilities ( XLU -0.18%) and Energy ( XLE -0.46%) were the two losing sectors.

The Fed’s decision was to raise interest rates by 25 basis points, a widely anticipated level for the first-rate hike. However, the Fed also announced plans to take on inflation aggressively with up to seven more rate hikes this year to end the year with a 1.75% to 2% interest rate. That aggressive stance was likely the reason for the initial reaction from investors.

In other economic news, Retail Sales and Core Retail Sales for February were less than forecast. Export Prices were higher and Import Prices were lower than forecast. Crude Oil Inventories were higher than expected.

The US Dollar index DXY ) fell by -0.62% with most of that coming after the Fed announcement. The US 30y Treasury Yield declined while the 10y and 2y Yield rose. High Yield ( HYG ) and Investment Grade ( LQD ) Corporate Bond prices rose. Brent Oil topped $100 briefly but ended the day with a decline.

The put/call ratio ( PCCE ) declined to 0.795. The CNN Fear & Greed index moved closer to Neutral but remained in the Extreme Fear range.

All of the big six advanced Microsoft MSFT ), Alphabet GOOG ), and Nvidia NVDA ) rose above their 21d EMA lines. Amazon ( AMZN ) closed above both its 21d EMA and 50d MA.

Alibaba (BABA) topped the mega-cap list with a massive +36.76% gain as the Chinese government vowed to support public companies. Stocks at the bottom of the mega-cap list all had less than 1% declines. Johnson & Johnson was at the bottom of the list with a -0.92% decline.

23 stocks in the Daily Update Growth List gained over 10%. The six Chinese stocks in the list gained over 25%. The top stock was Futu Holdings which soared by +39.54%. Not a single stock in the list declined. CrowdStrike ( CRWD ) had the smallest gain, advancing by +0.54%.

Looking ahead

Building Permits and Housing Starts data for February will come in the morning. We will also get the weekly Initial Jobless Claims. Just before the market opens, the Industrial Production numbers for February will be released.

Trends, Support, and Resistance

The index met resistance at the 21d EMA in the morning, then got support at 13,000 in the afternoon dip, and finally climbed back to close above the 21d EMA .

Because of the sharp afternoon rally, even the one-day regression trend line points to a decline tomorrow, which would be -0.96%.

If the index returns to the five-day trend line , it would mean a -2.95% decline.

The trend line from the 2/10 high points to a -4.89%.

Just for some optimism, if we followed the trend line from the 3/14 low, it points to a +2.58% gain for Thursday.

Wrap-up

What a wild reaction to the Fed announcement. It may take some time to sort out where investors in both equities and bonds see the impact of the more hawkish fed. We might see some more volatility over the next few days as investors react to the Fed’s new plans and any developments in Ukraine.

Stay healthy and trade safe!

Comments

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