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Well, the move lower in the equity market seemed pretty well telegraphed over the past few days, as I’ve noted the Tax Day TGA rise and the unimpressive price action on Monday and Tuesday.
Today’s sell-off saw a rise in volume, but not by much, so either the selling is going to intensify, or this was a one-day wonder. Volume on the S&P 500 futures was nothing noteworthy.
The volume has been coming in waves, and today may have just been the start of the next one. If volume is heavy tomorrow, it’s likely because sellers are pushing prices lower.
Today’s price action looked pretty much like what we have seen the last few weeks, just the constant selling pressure that takes place nearly all day, with the exception of the final 30 minutes. If this is the start of wave 5, then we likely still have much more to fall, and it likely involves undercutting the April 7 lows.
That 4,500 level I have spoken so much about for the last 18 months is just a region; for all I know, the bottom could be around 4,200 or 4,700. But I think it is a good range; we must assess things as they develop. Of course, my view could be completely wrong, and today’s move down was a fake-out.
That is a region where you can start to argue that stocks are at least nearing fair value, based on where I think earnings for 2025 are likely to be.
I think it really comes down to the FX market telling us what happens because it is clear at this point that as stocks drop, the dollar weakens, and that is due to global outflows. Well, the USDJPY is on the cusp of a major break lower. A break of support at 142 could easily set up a return to 137-138, and if the USDJPY is going lower, the S&P 500 and the NASDAQ are likely to follow.
Anyway, this free commentary will be back over the weekend at some point.
-Mike
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TGA (Treasury General Account) – The U.S. Treasury’s account at the Federal Reserve. Movements in the TGA can impact liquidity in the financial system, especially around tax season when the government collects large sums of money.
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Telegraphed – In market context, this means a move was anticipated or signaled in advance through various indicators or price action.
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One-day wonder – A market move (usually a sharp rally or sell-off) that only lasts for one day and doesn’t lead to a sustained trend.
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Price action – The movement of a security’s price plotted over time. Traders use it to make decisions based on patterns or momentum, without relying heavily on indicators.
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S&P 500 futures – Contracts that speculate on the future value of the S&P 500 index. They are widely used to gauge market sentiment and direction outside of regular trading hours.
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