It will be another busy week for stocks and bonds. The Fed minutes will be released on Wednesday afternoon. There’s no doubt that the Fed wants higher rates at this point, and the minutes should reflect just how many hikes the Fed is thinking about and the potential path for the process to unwind the balance sheet. If the Fed plays this right, the minutes should reflect a more hawkish stance than what the market wants to hear.

But what is important to think about is what the Fed says and what the Fed will ultimately do. If the Fed is successful in its message, it should be able to get the market to do most of the dirty work for it, with the market lifting rates, tightening financial conditions, and slowing the economy.

It should ultimately lead to the Fed being far less aggressive down the road. But the path to that point is likely to be uncomfortable with a market that will push rates higher and worries about a potential policy error, resulting in compression and slower growth.

Financial Conditions (IEF/LQD)

Those financial conditions are now tightening very quickly right in front of us, as the IEF/LQD has broken free and is beginning to rapidly move up. The faster and further this ratio rises, the tighter financial conditions are becoming. Watch this ratio closely.

Corporate Bond ETF (LQD)

The LQD ETF has fallen to the lowest level since the spring of 2020, indicating that rates for corporate bonds are surging, liquidity is thinning, and the effects of the Fed jawboning the market are being seen. The support level at $124.50 is critical, as a break of that price will send the LQD much lower and tighten financial conditions even further, with the potential for it to fall to $121.

S&P 500 (SPY)

Tighter financial conditions mean less access to leverage and margin, which is a huge negative for equity prices and another reason why the indexes may remain under pressure in the weeks to come. At this point, there is a double top that appears to be in place and confirmed.

While it is possible to see the index rebound to start the week, I would not expect to rise beyond 4,480-ish. If that level ends up holding on a rebound as I expect, then we should a move lower and this may put the index on a path lower beyond 4,200 by the middle of March.

Roku (ROKU)

Roku reports results this week, and I guess the market finally realized what I was preaching for months, maybe well over a year, when the valuation was just plain stupid.

The stock has tried a couple of times to break the big downtrend that started in July, and I’m not going to change what has worked so well, which is my 5 wave count, and so I will stick with it falling to $102. If doesn’t, that's alright. I don’t think anyone can fault me for being wrong on the final $50, after getting the move from $485 to $150 correct.

Shopify (SHOP)

Shopify will report results this week too, and while I like this company and what it is has done, since I use the product, the stock is another story. There is a huge difference between a great company and great stock, which is a very important concept to understand. I still think it needs to fall further.

What we have generally seen taking place in the market is stocks returning to their pre-COVID-19 historical value, and Shopify has not been excluded, and that is around 9 times 1-year forward sales, or about $600. That works really well with the technical chart, and with support around $590.

Nvidia (NVDA)

Nvidia will report results this week, and this is a company that typically beats and raises, so a miss would be devastating. As well, the beat and raise needs to be significantly better than what is expected to push the shares higher.

However, based on historical valuations, this stock is worth much less, perhaps between $150 and $190, depending if you are using a price-to-sales or PE ratio. In either case, that is a long way down. While I don’t think that is likely at the moment, $207 is still very possible - if not this week, then in the weeks ahead.

Cisco (CSCO)

Cisco will report results, and if history serves as a guide, then Cisco will do what it normally does: beat by a penny and eek out a beat on revenue, and then issue downside guidance with the shares probably dropping 5%. That means trading down to $51 and testing support.

Adobe (ADBE)

I said on Thursday to watch Adobe for a break lower and the potential to act as a leading indicator for the entire market. Well, it broke on Friday, and now it is in a zone where it could actually move all the way down to the sub $450 levels. The stock would start becoming really attractive at those levels for the long-term.

Good luck this week. Now, I think at this point for those of you that have followed me long enough, you can finally begin to appreciate why I was negative on so many of these stocks when they were going up endlessly.