On Wednesday, the DOW rallied over 900 points after the FOMC release and during the Jerome Powell press conference. On Thursday, all of those gains were eliminated and more as the Nasdaq had its biggest one day decline of the year and the biggest since 2020. Now the market averages are sitting right on their lows on the year, which looks like major support levels on their charts. You know many bought yesterday and will try today with the notion that the stock market MUST go up now.
Just as important as the stock market, the ten year Treasury bond yield closed above 3% yesterday and is now clearly above a downtrend line going all of the way back to 1980. Bond yields hit a secular low in 2020 and are now in a secular bull market, which is bearish for bonds and stocks. If anything, this is the one single biggest factor driving everything in the financial markets, but you can’t tell someone who just opened up an account on Robinhood after the March 2020 crash or started trading after that who got programmed by the social media memes telling them that stocks were “stonks.”
Those folks still trading are the ones buying. I loaded up Fidelity yesterday morning to see their top orders and that is what it showed.
On a big down day in the stock market, with big money and institutions dumping, the small trader active in the market is doing more buys than sells by 2-1 margin that is now how bear markets end;until the small players active in the market the bear market will not end, will eat pic.twitter.com/iDugXsBX9P
— Mike Swanson (@tradermike_1999) May 5, 2022
I have no idea what the stock market will do today, it is in such a precarious position now. I hope it does bounce again to give people a chance to get out before it dives below support, but I would not make a bet on such a hope.
You don’t make money by trying to predict what the market will do, but by recognizing the trends and when they change and adapting to them when they do change.
We’re in a bear market for the US stock market averages.
That is what this type of price action this week, and all of it since New Years, represents.
And last year, the ten year Treasury bond yield got above 2% and people like Cathie Wood didn’t think that would happen, claiming last year that inflation would not increase due to technology.
Now it has gone above 3% for the first time in several years and may never go below that level for the rest of our lifetimes.
Big things are happening, but they don’t show up on a Robinhood app.
And commodities remain in a bull market. Oil is up today and there is no a sign of a top in the charts.
That’s what I talked about with Jim Goddard of www.howestreet.com yesterday.
-Mike
