What we are seeing in the markets:
June 15th 2022 the US Federal Reserve raised short term rates by .75%. This is the largest move in a single meeting since 1994.
Inflation at 40 year highs
ALL major indexes making new YTD lows
Markets entering OFFICIAL bear market territory (-20%)
Risks of a recession are knocking the front door
There really isn’t much to like about the following chart comparing the SPY, IWM, and QQQ’s:
SPX (Dark Blue) - QQQ (Light Blue) - IWM (Orange): All major Indices rolling over in tandem.
The argument up until this week has been that we haven’t hit official bear market territory being that the S&P 500 hasn’t fallen 20% off the highs. These are traditional proxies for bear market territory, which you may or may not really mean anything. But, we can all agree we are in a bear market and risk off is the name of the game.
Lets look at some of the internals of the market, starting with the Advance/Decline Line. You can see in the chart below that the Advance/Decline Line continues lower as the market moves lower confirming the current price action.
Advance/Decline Line continues lower, confirming the falling price action as of today.
Below is the Net New Highs/Lows which is subtracting new highs from new lows on a 52-week basis. We can see that the new lows is gaining significantly currently. Once again confirming the price action we are seeing in the market.
Next let’s have a look at the On-Balance-Volume.
When we look at all of these indicators up agains the S&P 500 in the chart below, it’s interesting to see how they all began to give signals of trend changes before the S&P 500 even made its all time highs:
As of right now, we don’t have many positive developments to discuss. What I will be looking for is these same signals that lead the market to the downside, to show us signs of a ‘potential’ recovery. Time will tell as always!