Stocks fell again this afternoon as Fed Chairman Jerome Powell’s hawkish remarks from Friday weighed heavily on bulls. Higher rates, slowed growth, and persistently high inflation were all hinted at by Powell. The market plunged in response on Friday.
Today, bears took control once as investors awaited some key economic reports.
“While the aggressive and unrelenting selling from Friday is abating, there isn’t much genuine buy demand – even the bulls want to get through some of this week’s major macro events (including China’s PMIs and the Eurozone CPI on Wed and the US jobs report on Friday) before stepping back in on the long side,” wrote Vital Knowledge founder Adam Crisafulli.
“The late-summer attendance/volume conditions make the environment even more treacherous than normal, while Sept’s horrible seasonals are just one more factor keeping people on edge.”
Raging natural gas prices in Europe could result in a hotter than expected Europe CPI reading this Wednesday. Many investors are watching Europe closely, as a failure to control energy costs there would drag US stocks lower, too.
But US stocks already have a problem on their hands after jolting lower again today. Last week, a short trade trigger after the S&P (as represented by the SPY) closed below its bullish trend (yellow trendline) and the 10-day moving average.
The S&P hinted at a recovery on Thursday but ultimately plummeted in response to Powell’s speech on Friday.
Now, the index is in oversold territory according to the stochastic indicator. The last few protracted selloffs of the year have experienced bear-rattling bounces on the way down. It’s likely that we’ll see another this week, possibly as soon as tomorrow.
The 50-day moving average is also within sight of the S&P, indicating that a longer-term selloff may be getting underway. Watch out for a cross below the 50-SMA as we head into September, one of the market’s worst months historically.
Bloom Energy Corporation (NYSE: BE) already had its mid-correction bounce on Wednesday and Thursday of last week. BE even closed above the 10-SMA while breaking its minor bearish trend.
That all fell apart Friday, though, when BE corrected again, failing to rally. The stock then closed below the 10 and 20-SMAs today, breaking its very minor bullish trend (yellow trendline) in the process.
The stochastic indicator suggests that the stock has plenty of room to fall, too.
For those reasons, it might make sense to take BE short with a trade trigger of $25.21, below today’s low, as the general market eyes a sharp (but likely temporary) rebound.
