{"id":58634,"date":"2022-01-07T23:00:25","date_gmt":"2022-01-08T07:00:25","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=58634"},"modified":"2022-01-08T11:07:59","modified_gmt":"2022-01-08T19:07:59","slug":"surge-and-major-fade-ring-in-new-year-the-market-breadth","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2022\/01\/07\/surge-and-major-fade-ring-in-new-year-the-market-breadth\/","title":{"rendered":"A Surge And A Major Fade Ring in the New Year – The Market Breadth"},"content":{"rendered":"\n

Stock Market Commentary<\/strong><\/h2>\n\n\n\n

The strong end to 2021<\/a> mattered for just one day so far in 2022. Presumably fresh passive investments helped create a broad surge on the first day of the year. Wednesday’s release of the minutes from the Federal Reserve’s December meeting<\/a> changed everything. Apparently, the Fed talk sounded a lot more hawkish than expected. Subsequently, a broad-based sell-off took stocks down. The major fade reversed the market’s new year cheer. The indices suffered big losses and market breadth suffered a major setback. Stocks limped their way from there. An underwhelming December jobs report<\/a> failed to produce a bad news is good news (less hawkish Fed) reaction.<\/p>\n\n\n\n

“…participants judged that the appropriate timing of balance sheet runoff would likely be closer to that of policy rate liftoff than in the Committee’s previous experience. They noted that current conditions included a stronger economic outlook, higher inflation, and a larger balance sheet and thus could warrant a potentially faster pace of policy rate normalization. They emphasized that the decision to initiate runoff would be data dependent…<\/p>

Many participants judged that the appropriate pace of balance sheet runoff would likely be faster than it was during the previous normalization episode.”<\/p>Minutes of the Federal Open Market Committee<\/a>, December 14-15, 2021<\/cite><\/blockquote>\n\n\n\n

The Stock Market Indices<\/strong><\/h2>\n\n\n\n

The S&P 500 (SPY) started the new year with a 0.6% gain and a marginal all-time high. A small gain the next day melted into a small fade. The hawkish Fed news took the index down 1.9%. The last two days of the week featured battles with support at the 50-day moving average (DMA) (the red line below). I bought a weekly January $472\/$477 SPY call spread to play the index’s pattern of bouncing off this reliable support level. If support fails, I will not buy the SPY again until 1) oversold conditions and\/or 2) a confirmed 50DMA breakout.<\/p>\n\n\n\n

\"The<\/a>
The S&P 500<\/a> (SPY) started the year with a 0.6% gain and proceeded to sell-off to its 50DMA support.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n

The NASDAQ (COMPQX) is once again lagging the S&P 500. Not only did the tech-laden index suffer a whopping 4.5% loss, but also it closed right around the December intraday lows. Ahead of the Fed meeting minutes I bought a QQQ calendar call spread that blew up relatively quickly. The NASDAQ looks poised to test 200DMA support (the blue line) for the FIRST time since April, 2020, almost two years ago. <\/p>\n\n\n\n

\"The<\/a>
The <\/b>NASDAQ<\/a> (COMPQX)<\/b> confirmed a 50DMA breakdown and closed the week right at the December low.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n

The iShares Russell 2000 ETF (IWM) suffered along with the rest of the market. The index of small caps lost 2.9% for the week. The only trade on IWM for the week would have been to try a fade from resistance. IWM remains a play on the trading range until further notice. <\/p>\n\n\n\n

\"\"\/<\/a>
The iShares Russell 2000 ETF<\/a> (IWM) hit resistance at its 50 and 200DMAs and finished the week near the lows of an enduring trading range.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n