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News Dominates the Markets March 12, 2022

Posted by Tom in Thoughts.
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March 11, 2022 – Needless to say (but I will) news continues to dominate the market and investor behavior.  The western world is in crisis with the near term future unknown.  An irrational authoritarian making irrational decisions that affects millions . . .  for absolutely no good reason.  Not a good environment for putting finds at risk.  For the week, S&P 500: -2.88%; NASDAQ “Q’s”: -3.82%; Dow Industrials: -1.99%; NASDAQ Composite: -3.53% and Bonds (corporate): -1.82%.

click on chart to enlarge

Looking backwards, let’s take a statistical look at market drawdowns / corrections.  A “mild” correction has generally been 10 to 15% drawdown off the previous high.  “Major” (i.e. recessionary) drawdowns are typically 25 to 45% off the highs.  Right now we’re at about 11 to 15% depending on which index you look at.  So . . .  for the time being we’re right at the edge of a “mild” correction.  A break below the 1300 level on the NASDAQ Composite could signal another possible leg down.  Conversely, at break (mulit-day) above the 13837 “mid line” may (just may) indicate a bottoming formation in the price structure.

On deck next week is the March meeting of the Federal Reserve, so watch for news coming out Wednesday afternoon.  Will they raise rates ¼% or ½% or not at all?  The market appears to have factored in at least a ¼% in March and perhaps another ¼% in May . . . but who knows?

There are some possible signs for the future.  First off Tech company insiders are buying their own stock.  Volatility is high and the Implied Volatility of options is at a near term high as expected.  This high of Implied Volatility can be an indication of an extreme in market pessimism (a fear index) so perhaps it is ‘darkest before the dawn’.  Overall, I’m looking for a bottoming / basing formation but fully aware that things could get worse as well; holding a big chunk in Cash.

The Short Term Sector Strength table –

(Note: for “Trend”, L=Long term, M=Medium term, S= Short term.  “A/D” is a ratio of Accumulation and Distribution. “%Cl/52 Hi” is the current % price off of the 52 week high.)

That ‘bout it for now.  Stay nimble but patient.  Have a good week.     ……….  Tom  …………

Price chart by MetaStock; pie chart & table by http://www.HighGrowthStock.com. Used with permission.

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