{"id":60223,"date":"2022-06-17T17:57:35","date_gmt":"2022-06-18T00:57:35","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=60223"},"modified":"2022-06-18T00:28:23","modified_gmt":"2022-06-18T07:28:23","slug":"bracing-for-a-summer-of-discontent-the-market-breadth","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2022\/06\/17\/bracing-for-a-summer-of-discontent-the-market-breadth\/","title":{"rendered":"Bracing for A Summer of Discontent – The Market Breadth"},"content":{"rendered":"\n

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

Central banks are scrambling in the face of what is becoming a summer of discontent. Last week was chock full of news from monetary policy. The Federal Reserve, the Bank of England (BoE), and even the Swiss National Bank<\/a> all took action against inflation. The European Central Bank (ECB) held an (underwhelming) emergency meeting to address growing instability in its bond markets. The Bank of Japan (BoJ) stood out among central banks. The BoJ kept rates and quantitative easing steady as it still sees no real inflationary pressures<\/a>: “the year-on-year rate of change in the CPI (all items less fresh food and energy) is expected to moderately increase in positive territory on the back of improvement in the output gap and rises in medium- to long-term inflation expectations and wage inflation, and partly also of a pass-through of raw material cost increases.” <\/p>\n\n\n\n

Conditions look poor for new investments and a sustainable bottom looks elusive. Any rallies that materialize seem likely to crash into brick walls of resistance. An extended bear market is well underway.<\/p>\n\n\n\n

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

A day after testing resistance at the bear market line<\/a>, the S&P 500 (SPY) fell 3.3%. On Friday, the index barely stabilized with a 0.2% gain. While I earlier wrote about my expectations for a post-Fed fade, I definitely did NOT expect such a thorough thrashing. On Thursday, the S&P 500 gapped all the way down to its December, 2020 closing low and sellers never looked back. The discontent in the index looks heavy enough to sustain an extended bear market and a long stay in oversold territory. The S&P 500 now needs a 4.4% gain just to challenge the bear market line from current levels.<\/p>\n\n\n\n

\"The<\/a>
The S&P 500 (SPY) confirmed overhead resistance at the bear market line. Only oversold conditions reduce the immediate risk of much lower prices.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n

The NASDAQ (COMPQX) is leaving its last important line of resistance far behind. The tech laden index’s declining 50-day moving average (DMA) is about to overtake that line as key resistance. The NASDAQ trades near a 21-month low but the 1.4% gain was enough to allow me to flip a QQQ call that I bought in the depths of Thursday’s extreme 4.0% loss. Like the S&P 500, sellers gapped the NASDAQ down to a new low and just kept pushing prices lower from there.<\/p>\n\n\n\n

\"The<\/a>
The NASDAQ (COMPQX) picked itself up from a 21-month low with a 1.4% gain.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n

The iShares Russell 2000 ETF (IWM) showed its discontent with a clean break below its pre-pandemic high. Friday’s small rally for the ETF of small caps stopped short of what is now key resistance. IWM closed the week at a 19-month low. The complete loss of pandemic era gains is a red flag signaling a summer of discontent.<\/p>\n\n\n\n

\"The<\/a>
The iShares Russell 2000 ETF (IWM) gained 0.8% but faded from resistance at the pre-pandemic high.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n