Stocks Drop On November 30 And Are Now Left To Stand On Their Own

Stocks fell sharply again today, undercutting Friday’s low by falling roughly 1.9%. The market turned on Powell’s tapering stance, which seemed to favor a faster taper. It was noted on a few occasions on TV about the timing of this stance, especially with the uncertainty around omicron.

The timing was not a mistake; everything Powell says, I’m sure, has been carefully vetted and thought about. He is sending a message to the market that new coronavirus variants will not derail the Fed’s plan to taper. I would take it as far as to say that I think the Fed wants the market to do the heavy lifting for them and wants the market to tighten financial conditions because that may choke off inflation, allowing them a chance to leave rates lower.

It is just a theory, but he will speak again tomorrow, and maybe he will walk it back, but I don’t think he will. I think he will have the same stance. He wants the rates higher and wants the dollar strong; he knows this action will slow inflation.

Yields

The yield curve immediately reflected this with the short-end rising and the back-end falling, flattening again. The 30-Year minus the 3-Month is something to see. It is currently sitting on a significant level of support and has a broadening wedge pattern present. Both suggest that lower levels for this spread are coming, which would indicate further flattening. That spread could quickly drop to 1%.

(Click on image to enlarge)

S&P 500 (SPX)

The S&P 500 can easily fall to 4365, and nobody at the Fed would likely come to save it. After all, the last 10% gain on the S&P 500 and NASDAQ was just pure stupidity, all driven by multiple expansion. The “real” losses only start after we break 4,365.

For now, 4,550 is the next significant level of support, and then 4,490 and 4,450. So there is a lot of room here for things to happen.

(Click on image to enlarge)

Nasdaq (NDX)

It looks like a head and shoulder pattern is forming in the NDX, and once it breaks 15,990, that pattern will be complete, which could mark a significant top.

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Disclosure: Michael Kramer And The Clients Of Mott Capital Own AAPL.

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