1. Moving the markets

Aimless meandering best describes today’s session during which rally attempts were rebuffed with the major indexes dropping, bouncing off their respective unchanged lines and ending up moderately in the green.

Ahead of the Fed’s decision on interest rates tomorrow, the market environment was one of nervousness with the tug-of-war continuing between those traders who believe “the bottom” is in vs. the bears who are anxious about the potential of a sharp rebound rally.

With opposite forces at play, namely a slowing economy and a tightening Fed, hedge fund manager Paul Tudor Jones took time out from his busy schedule to utter these words of wisdom that “capital preservation should be the main goal for investors.”

No kidding. This is the purpose of engaging in Trend Tracking and the use of trailing sell stops to begin with, because there will always be periods where risk and uncertainty have risen to an all-time high, such as we are experiencing now.

Of course, not everyone understands the prudence of riding out bearish periods on the sidelines, which prompted ZeroHedge to tweet this keen and spot-on observation:

Bond yields dropped and popped, but the 10-year stopped short of reaching its 3% level again. Energy took top billing with VDE adding a solid +3.05%. Gold found some stability as well but only gained a tad and remains short of reaching its $1,900 level.

On the economic side, ZH reported that a record number of Americans just quit their job, as Job Openings surpassed unemployed workers by a record 5.6 million causing hedge fund manager Jeff Gundlach to quip:

Now it’s up to the Fed to determine future market direction, which will be based on the aggressiveness with which it will battle the inflation monster.

1. Moving the markets

Last week’s downtrend continued during the first trading session of May, as the Dow stumbled some 400 points early on, but a last hour rebound pulled the major indexes out of the doldrums and back into the green.

The S&P 500 fell to new lows for the year, which is viewed as a sign of more weakness to come, before being saved by the afternoon bounce. This index and its compatriot, the Dow, recorded April as being their worst month since March of 2020, which marked the beginning of the pandemic.

The tug-of-war continues between those that see the current setback as an opportunity to buy the dip vs. their opponents, who believe that stocks have further to fall.

Europe’s markets got hammered after a flash-crash in Stockholm gave an assist to the bears, who carried the torch through the regular session with all European indexes ending in the red.

Bonds were the story of the day with yields surging, as the 10-year topped 3% for the first time since December of 2018, after which equities tanked, and the Fed folded like a cheap suit by lowering rates again to prop up the stock market.  

All eyes are on this Wednesday’s Fed meeting on rate increases. Expectations are for a 50-bps hike this week and priced in odds are 25% of a 75-bps hike in June.

1. Moving the markets

Despite dip buyers stepping in this morning, to take advantage of lower prices caused by yesterday’s drubbing, the effort peaked mid-day, after which the selling resumed with the major indexes ending up only a tad above their respective unchanged lines.

The Nasdaq has now dropped some 12% in April, which is its worst performance since October 2008, with the S&P 500 and Dow being down as well but to a lesser magnitude.

Headwinds increased for equities this month, as uncertainty reigned due a variety of uncontrollable events—like inflation, Fed tightening, the war in Ukraine, and China’s zero-covid policy lockdowns—combining forces and giving the bears the upper hand.

Since my Domestic Trend Tracking Index (TTI) signaled a sell of domestic equities on 2/24/22, we’ve seen strong rebounds at first, however, they have lately turned into a bearish rut. As of today, our TTI hovers -3.72% below its long-term trend line (section 3).

As ZH pointed out, the FANG stocks puked again and have now reached a critical support level from right before the Covid crash, while Netflix still has a long ways to go to find any technical support at all.

Boeing got hammered as well and has now reached a price level last seen in June 2020. Bond yields, which had weakened yesterday, came back and stormed higher with the 10-year gaining over 10 bps to close at 2.835%.

The energy and commodity sectors rose, while Gold dropped and lost its $1,900 level again.