Major market indexes remain in a choppy range as individual stocks remain extremely mixed. Weakness in transports, semiconductors, and travel-related names, among others, appear to speak to an economic slowdown. This is what the market has been looking for, an environment where the Fed pushes the economy into a hard landing with its current hawkish policy bent. The hard landing is in turn expected to bring the Fed back to a more dovish stance where it will be forced to ease rates once again.
We see the potential for stagflation rising as market-determined interest rates such as the 10-Year Treasury Yield ($TNX) continue to move higher. Obviously, they have yet to be convinced that the Fed has inflation under control. The $TNX ended the week at 2.713%, its highest levels since early 2019.
We have seen some positive action among inflation-related and supply-shortage related names. We reported this week on Cameco (CCJ) as it finally posted a bona fide pocket pivot on a breakout move. That move, however, is running into resistance along the prior highs, and if we see the general market break more decisively to the downside then it is quite possible that even positive-acting names will be dragged lower. Keep stops tight!
Precious metals and precious metals-related stocks have continued to base, with the occassional positive daily price/volume bars showing constructive action at times. We reported on Thursday that big-stock gold miner, Barrick Gold (GOLD), which also produces copper, posted a pocket pivot along its 10-day moving average. While this is constructive action, it has not led to any further, substantial upside action from here.
We remain cautious on the market overall. While there are pockets of strength from time to time, the backdrop strikes us as one of a deteriorating nature as more and more groups break down, including semiconductors, travel & leisure, homebuilders, cloud software, and big-stock NASDAQ names. For that reason, the Market Direction Model remains on a SELL signal.
VoSI Focus List Review for the Week Ended April 8, 2022
|Published:||11 Apr 2022 05:25 ET|
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