Stocks Drop on November 2, 2022 As The Fed Provides A Hawkish Surprise

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11/2/22

#STOCKS – $INTU, $AMD, $QCOM

#MACRO – $SPY, #RATES, #GOLD $GLD

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Stocks dropped today after the Fed failed to deliver the dovish pivot the market was waiting on. Not only did the Fed not deliver on the dovish pivot, but it was also made clear that rates would have to go higher than previously thought, and that the runway for a soft landing was narrower.

So in classic form, the S&P 500 dropped like a stone, closing around 3,750. That is the dividing line for tomorrow. If the 3,750 level breaks, the index could fall back to 3,640 and potentially back to the gap of around 3,580. The only thing lifting the market was hope and systematic flows; both have vanished.

The key to what happens from here will return to the dollar and yields. Equities will be pressured lower if the dollar keeps strengthening and yields keep increasing. Equities will likely begin making new lows if the dollar and yields start making new highs.

Rates

The 2-yr is now back to 4.6%, and as I have been saying, I think it is going higher and potentially as high as 5%. That is where the Fed fund futures are seeing the overnight rate around by May 2023. If the overnight rate is going to 5%, then the 2-year should rise to about 5%, and a bull flag projection suggests 4.92%.

Nasdaq (QQQ)

I think the QQQ is already broken after falling through support today at $269. It is probably on its way to filling the gap at $260.

AMD (AMD)

AMD ended up finishing the day lower by almost 2%, despite rising by nearly 5% at the start of the day. The question is whether there is more follow-through. If the shares can break support at $58.50, then a retest of the lows at $55.50 seems possible, which opens the door to the shares potentially falling back to $49.

Qualcomm (QCOM)

Given that horrible revenue guidance, I thought Qualcomm would be down much more after hours. The opportunity for the stock to fill that gap at $92 just got closer, given the terrible outlook. The falling RSI would suggest that the stock makes its way down to that gap.

Intuit (INTU)

Intuit appears to be forming a Head And Shoulders pattern, with the neckline around $385. The news from Intuit regarding its Credit Karma unit started this recent move down, and even the earnings pre-announcement didn’t help today. The shares struggled to rally even before the FOMC. A break of $385 could lead to a further decline to around $325.

Gold (GLD)

Finally, gold looks like it is getting ready to break lower, and with the dollar and rates ripping, I do not see how gold doesn’t fall. Support for gold comes at approximately $1,565.

-Mike

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