Stocks Fall Sharply And May Have Much Further To Go

Stocks had another weak session, with the S&P 500 falling by 55 bps, but was more than 1.3% off its high of the day, so it was a big Intraday reversal. Meanwhile, the Qs finished the day lower by almost 1.7%. The selling pressure has been fierce late in the day more recently, and I’m not sure if this part of the quarter-end rebalancing or there is something more at play here. Regardless, things could start to get ugly, especially for some of these overvalued technologies “disruptors”.

Nasdaq (QQQ)

If the Qs fall below support at $310, it will quickly send the ETF back to around $300, filling a gap from March 9. However, that may not be enough because the RSI isn’t even close to being oversold yet, and volume levels are still strong. Is a drop back to $275 possible? Well, if we drop below $300, we will find out.

S&P 500 (SPY)

There is still a gap that needs to be filled in the S&P 500 at 3,830, and if that happens, the long-term March uptrend will break for a second time, and I don’t think good things follow.

Because the damage has been done, yields have risen, and spreads have widened dramatically. That is strengthening the dollar, and that with all of the other disruptions in the world will help the dollar continue to strengthen, and that will be a big problem for many asset classes, and it will most certainly kill the reflation trade. Even if yields begin to drop some on the 10-year, they are not going low enough to boost technology anytime soon.

Biotech (XBI)

Risk-on has turned off, and biotech is the best example of risk in the market. The ETF is now down more than 25% in the past month, and it probably isn’t finished falling. It hasn’t even hit oversold conditions yet, which means the trend isn’t even close to reversing.

Bitcoin (BTC)

Another risk-on play has been Bitcoin, and that looks like the uptrend just broke. This will really be interesting to watch. My view on bitcoin is not favorable.

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Disclosure: Mott Capital Management, LLC is a registered investment adviser. Information ...

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