{"id":59515,"date":"2022-04-22T23:43:59","date_gmt":"2022-04-23T06:43:59","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=59515"},"modified":"2022-04-23T14:43:49","modified_gmt":"2022-04-23T21:43:49","slug":"resistance-to-fed-gives-way-to-bear-the-market-breadth","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2022\/04\/22\/resistance-to-fed-gives-way-to-bear-the-market-breadth\/","title":{"rendered":"Resistance to the Fed Gives Way to the Bear – The Market Breadth"},"content":{"rendered":"\n

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

The stock market chopped into bearish conditions<\/a> in the previous week. My reasons for bearishness were not obvious, but, as is typical, market breadth dynamics led my thinking. Last week, the stock market flagged very clear signs of bearishness. Resistance to the Fed in the form of disbelief in the process of normalization gave way to the bear. Fed-speak<\/a> reminded the market one more time that the normalization of monetary policy is just getting started instead of coming to an imminent end. As a result, a lot of bets reliant on a Fed stuck in easy money mode continue to fall apart. At the same time, some segment of the market is racing ahead in fear of an economic disaster at the other end of normalization. Together, these forces are weighing ever more heavily on financial markets. The major indices tell the story.<\/p>\n\n\n\n

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

For a brief moment, the S&P 500 (SPY) looked ready to take resistance to the Fed to a higher level. On Thursday the index peaked above converged resistance at its 20-day moving average (DMA) (the dotted line below) and 200DMA (the blue line). Instead, sellers took the baton and plunged the S&P 500 below 50DMA (the red line) support for a 1.5% loss. Friday’s deeper plunge confirmed both the failure at resistance and the breakdown. The S&P 500 re-entered bearish territory with a 2.8% loss. Since the index closed well below its lower Bollinger Band (BB), the coming week can easily open with a relief bounce. Such a moment will give bears a fresh opportunity to fade.<\/p>\n\n\n\n

\"The<\/a>
The S&P 500<\/a> (SPY) lost 2.8% and stretched well below its lower Bollinger Band (BB). With the March lows back in play, the index confirmed 200DMA resistance and a 50DMA breakdown.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n

The NASDAQ (COMPQX) made bearishness even more clear. The tech-laden index’s resistance to the Fed failed to conquer 50DMA resistance. A 2.1% loss followed by a 2.5% loss confirmed 50DMA resistance and plunged the NASDAQ close to its March lows. Unlike the S&P 500, the NASDAQ is not yet over-extended. It closed right on top of its lower-BB.<\/p>\n\n\n\n

\"The<\/a>
The NASDAQ<\/a> (COMPQX) lost 2.6% and printed its 4th lowe<\/em><\/strong>st close of the year. The index confirmed 50DMA resistance.<\/strong><\/em><\/figcaption><\/figure><\/div>\n\n\n\n

The iShares Russell 2000 ETF (IWM) quickly transitioned from a 50DMA breakout to a confirmed 50DMA breakdown. Moreover, the ETF of small cap stocks is close to testing its January low. Twice I thought IWM was churning out a new trading range. Now IWM looks ready for an extended sell-off.<\/p>\n\n\n\n

\"The<\/a>
The iShares Russell 2000 ETF<\/a> (IWM) lost 2.6% and is challenging the lows of the year set in January.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n