Measured Moves In The Market

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Coming into Monday, we wrote targets on the S&P 500 and Nasdaq 100.

Based on the measured move from the all-time high and the ensuing gap lower (or topping pattern), we shared with you all that the SPY target was 322, and QQQs target was 260.

And wouldn’t you know it?

Both landed right there.

Why is that significant?

The leaders of the market not only complied with those support levels; the usual suspects went green.

Apple AAPL, Netflix NFLX, Nvidia NVDA, Zoom ZM, Tesla TSLA, and Microsoft MSFT all closed up on the day.

Except for Tesla, all the others have been pandemic stars. Or in other words, tech-in-the-new-world outperformers.

However, this is in direct contrast to what many wrote about recently-that value stocks were making a comeback over growth stocks.

That certainly flipped course Monday.

To see a more sustained rally, ultimately, we need a couple of signs.

First is what was starting to happen until now, the economic modern family’s relative strength must hang in there.

The second sign is in what I continually call the Fed’s playground, junk, and high corporate yield bonds (LQD).

LQD barely budged. Hello Fed and hello growth stocks.

Yet JNK did fall. But, right down to major support.

So what’s next?

The chart I share with you on junk bonds shows the move down to the 200-DMA.

It began showing signs of stress last week when it broke below the 50-DMA. Now, the key, regardless of what many tech stocks did today, is if junk and the “inside” market sectors can hold on.

The Russell 2000 IWM, fell the hardest capping nearly a 4% loss.

Regional Banks KRE fell over 5%. Granny Retail fell nearly 3%. Same with Transportation IYT and Biotechnology.

Sister Semiconductors SMH though fell only about .5%.

So shy junk bonds?

Because there is the spec market that habitually goes to the tech and chip stocks.

And then there is the market risk gauges, which refer to the tech stocks but base the bias on the overall breadth of the market using these other key sectors like the modern family. Those are now flashing negative.

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