Market Notes – April 12/22

The market opened strong,  but couldn’t hold the intraday gains. The S&P 500 continued to trade with lower highs and lower lows, and has now fallen through  both the 50-DMA (red wavy line) and the 200-DMA (blue wavy line).  The inflation numbers were the main problem for the markets, as US inflation came out at 8.5%, which will put more pressure on the Fed to raise rates.

With US rates rising faster than the other main economies (Europe and Japan) capital flows out of those regions and into the $US.

There is usually a strong correlation between energy stocks and crude oil, but recently we are seeing a price divergence. The recent weakness in crude oil may suggest a growing sentiment among investors that inflation may be topping and a recession is a more likely occurrence.  This correlation will return, we just now need to see if oil resumes its rally and joins the XLE, OR if XLE starts to decline along with oil.

Gold had been trading in a tight range and it has been disappointing that it hasn’t been able to rally with the war and inflation.  It has now broken through near-term resistance, which is encouraging.

Stay tuned!