In our last Trend Letter, we noted that the key support level for the S&P 500 was 4200 and if it hit that level, we could expect a solid rally.  Today, the S&P 500 dropped close to that 4200 level at 4222, before rallying to close the day at 4410.  Watch the 4435 (first red dashed line)  level as initial resistance, which represents at 38% retracement to the early January high.  Investors must be careful as we typically see that after an initial bounce, the low often gets re-tested.

The Fed meeting is on Wednesday and depending on the decision from that meeting there is still room for plenty of volatility. There is still risk of lower lows.

Stay tuned!

(From CNN)… Stocks dropped on Tuesday as volatility resumed after a brief rebound earlier this week, with investors contemplating the impacts of a new coronavirus variant and new comments Federal Reserve Chair Jerome Powell.

The S&P 500, Dow and Nasdaq declined. The S&P 500 dropped about 88 points, or 1.90% on Tuesday. US crude oil prices dropped more than 4%. And shares of airlines, cruise lines and lodging companies considered to be some of the most exposed to virus-related disruptions each sank in early trading to reverse Monday’s gains.

Investors reacted to Fed Chair Powell’s latest remarks before the Senate Banking Committee, wherein Powell said the central bank could speed up its tapering process to end sooner than previously telegraphed in the face of rising inflationary pressures. The comments came even as some other market participants had expected the Fed to strike a more accommodative tone for longer in the face of the recently discovered Omicron variant.

“At this point the economy is very strong and inflation pressures are high, and it is therefore appropriate, in my view, to consider wrapping up the taper of our asset purchases, which we announced at the November meeting, perhaps a few months sooner,” Powell said. “I expect we will discuss that at our upcoming meeting.”

The S&P 500 dropped below its recent low from Friday and is now approaching near-term support at 4550.  A drop to 4550 would represent a pullback of  3.27% from the recent high. If the 4550 level does not hold, we have key support at early October low of 4300. A drop to 4300 would amount to an 8.72% decline.  Should 4300 not hold, then we could see a significant correction.

The Russell 2000 was down 2.04% and has made a rapid 10% decline from its all-time high achieved just over three weeks ago. Next support for the Russell 2000 ETF is 217, with key support at 211. A drop to 211 would result in a 12.88% sell-off.

Note at the bottom of the chart, IWM is now technically oversold, suggesting we see a bounce very soon. But the near-term trend is certainly down at this time, so any bounce may simply be a dead-cat bounce, and lower lows are certainly possible, if not likely.

The Canadian TSX index dropped 2.31% today and is now 5.10% below recent highs.  There is weak support at the 20,400 level, and stronger support at 20,030. A drop to 20.030 would represent a decline of ~8% from recent highs.

US 10-year bond yields dropped another 5.92% Tuesday, and are down over 14% in the last week.

Gold was down another 8.70 and will try to find support at 1765 level.

Stay tuned!

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The S&P 500 and Nasdaq ended higher on Monday, rising for a fourth straight day to add to gains after the S&P 500’s best week since July. Investors weighed concerns over elevated inflation against hopes that more companies will follow the lead of the big banks last week and post strong quarterly earnings results.

The moves in US stocks came amid a drop in overseas equities after China reported its slowest GDP growth rate since last year for the third quarter, as energy shortages and property-sector turmoil dragged down economic activity in the world’s second-largest economy.

This week, investors are looking ahead to a packed slate of corporate earnings results, which will help offer more insights into how companies across various industries have navigated inflationary trends, widespread labor scarcities and lingering virus-related disruptions.

The S&P 500 was up 15.09 points or .34%. Looking at the bottom of the chart we can see the 5-day RSI is now overbought, so we could have a short term pullback at any time, but understand the uptrend is still intact. Key support sits at the July low at 4250 (green dotted horizontal line).

Note: One thing that could trigger a pull back in December would be if Biden’s tax hikes go through.  If higher tax rates go through, investors holding long-term gains  will likely liquidate those positions by year-end, booking the profits at the lower tax rates this year.

This is a Key Chart! Breadth is looking good here. Since mid September the NYSE advance/decline line has rising,  now leading the major indexes higher. If this trend continues, then the seasonal lows should be in place.

Canada’s main stock market moved further into record territory Monday despite a relatively quiet day marked by a pullback in the key energy sector. The TSX has been the hottest market in North America and continues to make new all-time highs, which it did again today.

Oil was slightly lower on the day, but has been on a tear since mid August. Based on RSI (lower part of chart) oil is now technically overbought.

Natural gas prices have been volatile, rising 170% from December to early October, then selling off the last few days.

While North Americans complain about high natural gas prices, those in Europe have seen an 800% increase in the price of natural gas since November.  Putin had commented that Russia would increase supply, but today Russian producer Gazprom has decided not to increase supply to Europe, pushing the price up again.

Gold was down 2.60 and continues to struggle to gain any momentum. Our models are targeting a turn for gold in November and our subscribers will be alerted when we have a new BUY Signal. If you wish to subscribe, go to bottom of this page for some excellent discounts.

Bitcoin has been soaring in anticipation of the first Bitcoin futures Exchange Traded Fund (ETF) that starts trading tomorrow.

Stay tuned!

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Bonds were up today as a safe-haven play, so given that yields move inverse to the bond action, yields were lower.

Gold had a little bump, up 12.40.

While gold had a small bounce, gold stocks continued their decline, having just dropped below near-term support.

Cryptocurrencies continue to be very volatile, not being a safe-haven play today.

Stay tuned!

Wall Street ended in the green following a few wobbles in the morning. The economic data of the day was in line or better than expected, but other than that there wasn’t much in the way of catalysts for investors to get excited about.

After a small sell-off to start the month, the S&P 500 has managed to turn higher and stay above its 50-Day Moving Average (DMA), the red wavy line on chart. As we can see, that 50-DMA has been strong support since the start of the year (green arrows).

Something we are keeping an eye on for our subscribers is the level of margin debt investors have taking on to purchase stocks. As we can see, the margin debt – money borrowed from brokers to buy stocks – set a record in June at $882 billion (red line). July marked the first time margin debt declined since pre-COVID. The S&P 500 rose 2.3% in July, but margin debt dropped by 4.3%. As highlighted by the shaded areas, in previous times when margin debt declined, we saw significant corrections in the S&P 500.

Gold was down 12.30 today, basically giving up yesterdays gains. Gold has been in a downtrend channel since August’20 and has been unable to break out of near-term resistance at 1838  (horizontal red dotted line).

 Oil prices rose over $2 a barrel on Wednesday after government data showed a larger-than-expected drawdown in US crude inventories, and on expectations demand will rise as vaccination roll-outs widen.

US crude oil stockpiles fell last week to the lowest since September 2019, the US Energy Information Administration said, extending their drawdown after Hurricane Ida late August shut numerous refineries and offshore drilling production.

Stay tuned!