Rising concerns about inflation and the resurgence of COVID-19 infections hammered Wall Street on Monday, with major benchmarks suffering their worst declines since May, even as quarterly earnings continue to reflect a strengthening economic rebound.

Fears about broadly rising coronavirus cases drove the Nasdaq and S&P 500 to their biggest drop in nearly two months, and sent benchmark yields to their largest decline in over 3 months as investors sought shelter from the uncertainty. The Dow’s 725 point drop (-2.09%) was its worst since October 2020.

Adding to the market woes was the story in Reuters that Johnson & Johnson may be filing for bankruptcy due to the ongoing crisis of their baby powder containing asbestos.

The S&P 500 dropped 68.67 points or 1.59%. We want to see if the 50-DMA holds (red wavy line ) at 4240. After that, the next support level is 4163 (green horizontal line).

The Toronto stock exchange was down 259.09 points or 1.30%. Note that the Canadian index has now fallen through its 50-DMA. Next support level is 19,200.

Gold was down 5.80 today and has dropped back into its downtrend channel.  Next support level is 1760.

Bonds continued to rise, meaning yields decline. Here is the updated chart that we have been showing our paid subscribers. Most investors pay no attention to bonds and that is a mistake. We can see that yields are in a downtrend channel, with a series of lower highs and lower lows (red arrows).

With currencies, the $US and Japanese Yen tend to act as ‘safe haven’ currencies, and that is what we have been seeing as equity markets sell-off.

The $US has been on a nice run since the end of May and weakness in the equities usually means capital flows into the $US.

The Yen had been on a long downtrend since the start of the year, but has broken out in the last couple of weeks.

The Canadian dollar was the strongest major currency in the world for most of the last year. As we saw it starting to peak in May, we repeatedly recommended that Canadian subscribers convert some $CAD to $USD. Hopefully, they did.

Note:  both our Trend Technical Trader and Trend Letter services have been warning of a coming correction in the equity markets, and have provided subscribers with hedging strategies that will protect them in a downtrend. Protecting your assets in a violent downtrend allows prudent investors to be in a solid cash position that will give them the buying power to acquire targeted stocks at greatly reduced prices. .

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