Apple and Google, Twitter and Meta, on Boeing on Qualcom, on Intel, and Visa! Santa would be exhausted by the time he got through challenging our S&P high-flyers, and thus, investors have been in a slap-disturbing state, using any hint of weakness as a excuse to dump their holdings.
All this is going against a future of not IF but WHEN there will be a recession while the Ukraine is still fighting, and Covid continues to rage around the world, Oh yes, and don't forget inflation, which is completely out of control with no end in sight that's even worse.
Infections in the United States have increased by 50% this month, but China is locked down, yet most of the world is just pretending it isn't happening. We've already lost some of the US population, with 1/3 of them refusing to be vaccinated or taking most precautions, but this is not a political question, and now, there's nothing to do with this phenomenon, thus, what can we do if we're hit with another wave of Covid?
With Q1 GDP coming out on Thursday, what we're really concerned about is whether or not the indexes can stay out of our 20% correction range, which makes 13,500 on the Nasdaq hyper-critical as we fell below the 20% correction line there, as well as 1,920 on the Russell, which is our only index where we had no greater than a 20% correction during the first year.
- Dow 36,000 to 28,800 would be a 7,200-point drop with 1,440 bounces to 30,240 (weak) and 31,680 (strong).
- S&P 4,800 is 20% above 4,000 and that makes it an 800-point drop with 160-point bounces so 4,160 (weak) and 4,320 (strong).
- Nasdaq is using 13,500 as the base. 14,100 is the weak bounce and 14,700 is strong.
- Russell 1,600, would be about an 800-point drop with 160-point bounces to 1,760 (weak) and 1,920 (strong)
If the Nasdaq turns green, we have some hope, but if the Russell turns red, we must add additional hedges and consider financing completely. If these levels fail, you can't even imagine the carnage that lies beneath us. Look what a slew of the S&P is already:
If you look at it in perspective, then this is only a minor correction at best:
Covid alone reduced us from 3,300 to 2,200 in early 2020, but that's just one of the things we're worried about. From 4,800 a 33% correction would be about 3,200, the highest of where we had done last time, and from a long-term perspective, that would be nice consoldation for the decade ahead and still better than the 60% correction we had in 2008/9.
In our morning PSW Report, I asked you if you would like to raise a bit of money, stating:
The S&P 500 Futures (/ES) pay $50 per point and we're below the 50-day moving average at 4,416, so that would be the stop line and 4,320 is the strong bounce line, and, failing that, we have no support at all until the weak bounce line at 4,180 200 points below where we are this morning (4,385). If the S&P drops back to where we were a month ago, we risk losing $50 x 15 points = $750.
We still have the war, we still have Covid, and the Fed is continuing to hike rates because we still have inflation am I missing something? In fact, James Bullard, speaking of the Fed, said this morning that his target rate for this year was 1.5 percent, not 1.5 percent.
We fell out on Friday and that was excellent for $9,100 gains and I'd certainly keep a stop at 4,250 this morning to lock in $7,500 of profit, by the way! Oil is down another 5% this morning at $97 and that's almost tempting to play for a return to $100 on /CL but I'd rather play Natural Gas (/NG) over the $6.50 line with tight stops below, as Putin might cut off gas to Europe and send prices far more than $8. /NG
Gold (/GC) will be attractive if it returns over $1,900 (now $1,895) with tight stops below and Silver (/SI) will be $23.50. This week, the dollar is super-strong at 101.50 but hasn't properly tested 100 as it has gone over so I'm expecting a minor pullback as it's up on all the hawkish Fed remarks last week and that's unlikely to worsen and other Central Banksters may begin talking about raising their own rates and
That being said, let's take a look at our schedule for the week in which there are NO Fed speakers scheduled (doesn't mean they will say anything) as they also are likely to wait for Big Tech's earnings results before trying to steer the markets. We have the Chicago and Dallas Fed Reports this morning, and Chicago already reported a March reduction to 0.44 from 0.54 in February and that's down from 0.74 in January how is that going?
Notice personal consumption and housing went negative that's not good... Notice the sharp decline in Employment from last month. The last time we had that was August and these are early indictators but we had a decrease in September, as the S&P decreased by 7.5 percent from March highs, but I'm still expecting our -10% range to 4,180 before we're done.
We do not want to go to CASH!!! So far, we think the Government has another round of stimulus left to throw at us. So far, the Republicans have held up each vote on more stimulus, as they see them as blaming Biden and the Democrats for their economic issues, which is like blaming the firemen. What you can do?
BEFORE the market started falling, what we could do was improve our hedges in our short-term portfolio...
It's going to be a crazy week, so relax and have the day.