Stocks started the day higher, but it didn’t end well. The market initially jumped on the news that Jay Powell would get a second term as the Fed Chair. It was so widely applauded that quite literally everything went up. You know, like stocks, the fed funds futures, the dollar, the 2-year yield. The problem is that the stock market is not the sharpest tool in the shed, and while the entire market, except for stocks, realized Powell’s renomination was hawkish, stocks had no clue what was happening.

You see, the Fed Fund futures are now pricing in the first-rate hike by May. But how can that be? The Fed said it wasn’t going to finish tapering until the middle of the summer, and Powell made it clear that taper and increasing rates weren’t one and the same.

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Well, the dollar and yield curve had an excellent answer. Quite loudly they both said they now think the taper accelerates, so the taper will end sooner than expected. After all, Richard Clarida, the soon-to-be former Vice-Chair of the FOMC, alluded to that on Friday.

So wait, if the entire market, except for stocks, thinks that the taper will end sooner and rates are going to rise faster, how is that good for stocks? How is it good for stocks that the dollar is increasing as rates rise? Probably not so good.

How is it good that the energy, materials, and industrials rallied to start the day with the dollar ripping higher and rising above resistance at 96.30, and now probably on its way to 97.70?

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After all those 3 sectors don’t perform so well during the initial phases of when the dollar is strengthening, see the inverted dollar chart below and the years 2015/2016 and 2018.

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Anyway, the S&P 500 seemed to catch on late in the day about the potential problems it is now facing. You know, like a high valuation, slowing EPS growth, slowing global growth, a strengthening dollar, and tightening financial conditions. So the index dropped 80 bps in the final hour of trading (SPX).

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Meanwhile, the MACD is rolling over, along with the advance/decline line and the RSI, with the next stop around 4590.

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Amazon (AMZN)

Amazon didn’t fare so well today, oh well. It fell nearly 2.8%, maybe that’s a double top forming. Maybe it is not. But companies that miss revenue estimates and then lower forward revenue guidance and note higher costs aren’t supposed to rally to near all-time highs, so a move back to $3,300 could be quick.

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I don’t know what else to say, if the only things the bulls have to hang their hat on its seasonality and inflows, then I just ask that the last one out please remember to turn out the lights. The party is over.