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.

1. Moving the markets

The Nasdaq sustained its recent weakness and plunged some 4% in part due to increasing anxiety ahead of the quarterly earnings reports from the big players like Microsoft and Alphabet (Google) due out this afternoon. The recent Netflix blow-up is still on every trader’s mind.

However, today’s weakness was also assisted by the usual fears, namely the global economy as whole, the Covid surge in China, the war in Ukraine, increasing inflation numbers in the U.S., and the seemingly never-ending supply chain issues.

So far, April has not been kind to domestic equities with the S&P 500 having lost -7.8%, the Nasdaq being down -12.2%, while the Dow fared the best with only a -4.2% drop. This pretty much confirms the bearish position of my Domestic TTI (since 2/24/22), now below its trend line by -3.90%, to either be totally out of domestic equities or only have limited exposure.

And if you thought bonds would have helped to offset some these losses, you would have been wrong, because the widely held 20-year T-Bond ETF TLT lost -7.3% month to date. Ouch! As I posted before, in this high interest rate environment, bonds are no longer a “safe” haven.

In the end, there were not many places to hide. Energy bounced back nicely but ended the session unchanged. Commodities showed signs of life with DBC adding +1.37%, and gold managed to rebound but only by a meager +0.45%.

When the entire equity spectrum is down considerably, owning some sector ETFs with small gains will substantially mitigate the negative effects of the domestic equity arena.

1. Moving the markets

Another early sell off pulled the Dow down by some 400 points, as a one-two punch hit the US markets. Global fears about an economic slowdown loomed large, leading to a slump in Chinese stocks, which pulled energy, commodities, and precious metals off their recent highs—along with all US equities.

As a result, bond yields cratered for the first time in a while with the widely followed 10-year dropping 7 basis points to close at 2.827%. Uneasiness about this week being a big one for corporate earnings did not help, with about 160 S&P 500 companies scheduled to report and half of the Dow Jones. All eyes are on the big boys like Amazon, Apple, Microsoft, and Alphabet (Google).

Despite the early dump, the markets found some footing and the subsequent reversal sent the Dow up over 200 points into the close. The lead dog was the Nasdaq with a 1.29% gain, which could be just a temporary bounce of hope, as the index has come off its highs by some 20%.

The loser of the day award goes to SmallCaps, which have dropped to their lowest since December 2020 and are currently down 22% from their highs, as ZH pointed out.

The US Dollar continued its trajectory to higher prices, the Chinese Yuan went the other way, and the Russian Ruble soared to its strongest relative to the Euro in 2 years.  

On deck later this week are the latest CPI numbers from countries around the world, which will have an impact on bond yields and equities.