Investors collectively smashed their fists into their trading terminals this afternoon after yet another intraday reversal ripped stocks away from a bear market rally and back into a selloff.
The Dow, S&P, and Nasdaq Composite all tumbled despite opening significantly higher on the day. A tandem of upsetting stories ultimately caused sentiment to flip.
The first of which came from Reuters, which revealed that Russian gas giant Gazprom was planning on ending all natural gas flows to Germany (via Nord Stream 1) on July 22nd.
“Russian gas export monopoly Gazprom has declared force majeure on gas supplies to Europe to at least one major customer starting June 14,” read Reuter’s report.
“It said the force majeure measure, a clause invoked when a business is hit by something beyond its control, was effective from deliveries starting from June 14.”
This measure was enacted to release Gazprom from its obligation to deliver gas to Germany on July 22nd, when the 10-day Nord Stream 1 maintenance window was scheduled to end.
That didn’t sit well with bulls, as a natural gas crisis is the last thing the EU needs right now.
But it got worse: Bloomberg then reported that Apple (NASDAQ: AAPL) planned to slow hiring and spending on growth next year in anticipation of an economic downturn.
AAPL shares, unsurprisingly, plunged almost 2.1% lower in response. That’s the kind of thing that happens when the market’s top growth stock says it’s not going to chase growth as aggressively as before.
And down went the S&P (as represented by the SPY). The index didn’t even touch resistance (yellow line) at the market’s recent highs. It also closed below the 10-day moving average, which served as a fairly good short-term trend identifying indicator prior to the recent bout of volatility.
It wouldn’t surprise me at all to see the S&P test support near 3,730 tomorrow. If it does, we may finally see a drop to the mid-June low of 3,620 later this week.
Goldman Sachs revealed in a Sunday note that their top question from clients going into this week was:
“Why did the market not go down in the face of incredibly worsening macro and fundamental earnings data?”
If today’s trend continues, the top question heading into next week should be very different.
In particular, Pepsico (NASDAQ: PEP) shareholders are likely wondering whether their stock will avoid another sharp correction. PEP shares closed lower today, below the 10-day moving average and the stock’s bullish trend (yellow trendline) of the last few weeks.
The stochastic indicator also suggests that PEP has room to fall. The stock is in a unique predicament in that it’s about to breach the 20 and 50-day moving averages, too. A major bearish move could be forming with two longer-term moving averages in range.
For those reasons, it might make sense to take PEP short with a trade trigger of $166.17, below today’s low, as the general market attempts to pick up the pieces from this afternoon’s intraday selloff.