A nasty little move Tuesday stoked by Chair Powell’s hawkish testimony meant buyers from last week were now trapped. Basically he said the same thing as last month – rates are going higher and staying there for longer! Eventually markets will wake up to it, but for now we’ll simply ride out the trends.

Freepik

As I mentioned yesterday, difficult sledding on Tuesday as volatility was higher. Someone must have known Chair Powell’s comments were going to sting the market. A break of 4000 is not going to help the bull case, but a follow through day down is really going to put this rally in jeopardy.

Oil was down sharply as were precious metals, the dollar very strong along with bonds.

Last night saw strong earnings from security name Crowdstrike, also with raised guidance. This stock was on our ‘stocks to watch’ yesterday, it’s up 6.7% this morning. A few other smaller names reported.

More testimony by Chair Powell today, this time in the House. We’ll see if the market is soothed this time around, but certainly markets around the world are listening carefully.

The poor breadth from Monday spilled over to the next day, and now we have sell signals set up.

Volume started to recede early as the sellers pounced on the markets after support gave way.

As we mentioned yesterday morning, the markets were looking rather tired and due for rest. Who knew that Chair Powell was going to knock the legs out from under the bulls.

The Internals

What’s it mean?

The dam broke after Powell’s statement and follow-up Q/A. Notice the heavy selling from the VOLD and the sharp move up in the VIX. That told us this would be a trend down day, and we see that in the ADSPD (bottom, second from the left). One difference here is the put/call which popped above 1 Tuesday. There could be more selling before the end of the week.

The Dynamite

Freepik

Economic Data:

• Wednesday:JOLTS, ADP payroll, Fed beige book
• Thursday: Challenger job cuts, jobless claims
• Friday:non-farm payroll report

Earnings this week:

• Wednesday: CPB, UNFI, ASAN, MDB
• Thursday: BJ, LOCO, ULTA, DOCU, ORCL, JD
• Friday: BKE

Fed Watch:

Chair Powell will give day 2 of his twice yearly update on monetary policy and the economy in a House hearing. No other fed speakers this week. After the Senate testimony, fed funds futures have dropped sharply, the funds rate pointing to higher and faster for longer. 6% is now on the radar.

Stocks to Watch

Name – Oil and Gas, which have been falling lately, now to strong support levels.

Name – Tesla (TSLA), 190 price level, the stock has been selling on volume this week.

Name – Crowdstrike (CRWD), 130-140 level, strong chart with resistance much higher

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