Stocks Drop, Then Rise On Manic Monday
Michael Kramer | Jan 24, 2022 11:31PM ET
A pretty rough day in the market, with the S&P 500 dropping just about 4% through the morning and finishing the day higher by 28 bps, a huge reversal.
Days like Monday will not help the case of the markets to see the Fed become less hawkish, had the market stayed down, maybe. But a big rebound like this, coupled with some follow-through today, will not persuade the Fed to lighten up.
There is very little the Fed can do to change paths. It will take a more significant correction to get the Fed to change course. I do think the Fed wants assets prices to come up while they still have QE running to ensure there is enough liquidity and markets don’t start freezing.
S&P 500
The gap down and the significant drop seemed to be way overdone. An inverse head and shoulder pattern formed mid-day and was completed in the late afternoon. After that, the market went for the gap fill.
VIX
The VIX reached 40 yesterday before reversing and finishing the day at 29.9. So that tells you what led to the big market rally, as people closed put positions, which created a short-covering rally.
But I think what is important to remember here is that the market was in the middle of repricing, and repricings can be very violent, and that was what this looked like to me. You can see this clearly with the PE ratio breaking down and falling below 20 over the past few trading sessions.
NVIDIA
Many stocks appeared to put in short-term bottoms, like NVIDIA (NASDAQ:NVDA). It fell to nearly $207, which was a support level. Additionally, the shares reached oversold conditions based on the RSI. I don’t think it meant the declines were over, longer-term for this one.
Get The News You Want
Intuitive Surgical
Intuitive Surgical (NASDAQ:ISRG) may have also put in a short-term bottom as well.
Netflix
I would hope Netflix (NASDAQ:NFLX) has too. The decline in this stock has been jaw-dropping.
I expect volatility to remain high on Tuesday as people position for the Fed, but it would not surprise me if we finished little changed. It’s Wednesday afternoon that concerns me.
Original Post
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.