Market Recap: Market Reckoning - Will Support Levels Hold?

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Over the last week, we heard from the chair of the Federal Reserve Jerome Powell address worries over the recent 5.4% year over year inflation increase. While the Fed continues to hold an accommodative stance with its bond-buying program, some are doubting whether the Fed is taking inflation seriously. So far, the Fed continues to look at inflation from a transitory side and expects it to run hot for a while as bottlenecks and supply-chain issues get resolved.

However, prices change in consumer staples and in general tend to be sticky. This could be causing the market stress as this week’s price action has been unpredictable with new highs in the S&P 500 and the Nasdaq 100 followed by two down days.

With that said, we are watching specific sectors in the market to hold recent lows as they could be showing pivotal areas the market needs to hold if Monday’s market continues to lower.

To jump right in, the Transportation (IYT), Retail (XRT), and Regional Banking sectors (KRE) all have roughly the same chart pattern with a recent low created on 7/08. Come Monday, this low will need to hold if they are going to stand their ground.

Both the transportation and retail sectors are important, for they show sentiment in the demand and supply side of the market.

Additionally, regional and big banks kicked off this quarter’s earnings. Although the expectations for robust earnings were met, the banks for the most part, could not hold onto gains.

This could very well be the theme for the earnings in big tech, coming up very soon.

The market is forward thinking. Big expectations are most likely already priced in.

The third quarter may disappoint as labor is still a concern along with slower economic growth following the surge post-Covid. And, Covid has not exactly gone back into the closet either with surges in cases all over the globe.

The small-cap index Russell 2000 (IWM) is another focus at MarketGauge.

IWM has been range-bound since the beginning of the year and is now close to the lower edge of its range around $208 - 211.50.

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Disclaimer: The information provided by us is for educational and informational purposes. This information is based on our trading experience and beliefs. The information on this website is not ...

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