Stocks Finish Flat As Financial Conditions Tighten Further
Michael Kramer | Jun 23, 2022 12:37AM ET
The S&P 500 finished the day lower by 13 bps. It was a volatile day, with the market dropping sharply to open and rallying sharply, only to close flat.
There was a strong sell-off at the open, with the S&P 500 falling to around 3,720 and rebounding nearly 80 points to 3,800. But in the end, it closed at approximately 3,760.
Maybe it was due to Powell’s testimony; I’m not sure. He had nothing new to say, which may have been reason enough to rally.
I don’t think anything changed yesterday, so I will stick with my view that the S&P 500 retraces to under 3,700 in the next couple of sessions.
As measured by the iShares 7-10 Year Treasury Bond ETF (NASDAQ:IEF)/iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSE:LQD) ratio, financial conditions tightened again Wednesday and made a new closing high for the cycle.
So typically, when this ratio rises, it tends to coincide with the S&P 500 dropping. So either the ratio is playing catch up to the S&P 500, or the S&P 500 has a new low coming very soon.
Thursday will tell us a lot.
I inverted the IEF/LQD ratio on the chart below to make the relationship with the S&P 500 easier to see.
Yesterday, I wrote up a story about Exxon Mobil (NYSE:XOM) and a potential move lower in the stock. A bearish megaphone has formed, which could see the stock fall first to around $83, but I think there is potential for $70.
Copper prices have been dropping, and Wednesday, Freeport-McMoran Copper & Gold (NYSE:FCX) also fell by nearly 8%.
Get The News You Want
It is a big spot for Freeport on the chart, with the stock hovering around technical support at $30. Where copper goes, Freeport will follow. But if Freeport drops below $30, there is a long way for this to fall, potentially to as low as $26.
Copper is now trading below $4 and appears to be heading to around $3.70, which is the next big support level.
As noted over the weekend, copper seems to be following Taiwan Semiconductor Manufacturing (NYSE:TSM) lower. So it probably isn’t a good sign that Taiwan Semi is back to trading at its recent lows. This is, of course, also bad news for Freeport.
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.