{"id":59564,"date":"2022-04-26T21:57:29","date_gmt":"2022-04-27T04:57:29","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=59564"},"modified":"2022-04-26T22:11:43","modified_gmt":"2022-04-27T05:11:43","slug":"safety-trades-surge-as-stock-market-stumbles-toward-oversold-the-market-breadth","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2022\/04\/26\/safety-trades-surge-as-stock-market-stumbles-toward-oversold-the-market-breadth\/","title":{"rendered":"Safety Trades Surge As Stock Market Stumbles Toward Oversold – The Market Breadth"},"content":{"rendered":"\n

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

The runway for (short-term) bearishness has greatly shortened. The classic safety trades sprung to life to add exclamation points to the broadening sell-off. After over 6 weeks of near relentless losses, the Japanese yen (FXY) caught a strong bid. Inflation fears returned to the background as traders eased into Treasury bonds (per my pre-Fed strategy, I faded the move with May TLT puts). These turn of events coincide with the approach of oversold trading conditions. While last week’s snapshots of fresh bearishness<\/a> confirmed market sentiment was finally tuning into the Fed’s hawkish determination<\/a>. The awakening is reaching an overshoot that could easily exhaust motivated selling anytime this week.<\/p>\n\n\n\n

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

I find it hard to believe that four trading days ago, the S&P 500 looked set for a significantly contrary breakout above its 200-day moving average (DMA) (the blue line below). In a flash, the index has closed just short of its March and 2022 closing lows. The rush downward included a brief rally off intraday lows. That false move was strong enough to take the S&P 500 back into the green. If the March lows give way, the S&P 500 needs to hold May, 2021 support to avoid significantly more downside risk.<\/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) again. The index closed just short of a new 2022 low.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n

The NASDAQ (COMPQX) led the market’s bearishness with a confirmed failure at 50DMA (the red line below) resistance. Now the tech-laden index has returned to bear market territory with a 16-month low. With all of 2021’s gains gone, the NASDAQ has more downside risk to the November, 2020 lows. Unfortunately, strong rallies to the upside leave precious few “natural” levels of support on the way down.<\/p>\n\n\n\n

\"The<\/a>
The NASDAQ<\/a> (COMPQX) lost 4.0% and returned to bear market territory. The NASDAQ closed at a 16-month low.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n

The iShares Russell 2000 ETF (IWM) finally broke down with a 3.2% loss and a near 17-month low. The ETF of small caps quickly flipped from a potentially bullish 50DMA breakout last week to a very bearish breakdown.<\/p>\n\n\n\n

\"The<\/a>
The iShares Russell 2000 ETF<\/a> (IWM) lost 3.2% and closed near a 17-month low.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n