We keep wanting to go bullish, but the market won’t let us. Just when the NASDAQ looked like it was about to fly past its 50-day moving average and say bye-bye to resistance, the Federal Reserve raised rates. At first, the market reacted positively to the expected rate hike, sentiment went south after comments from Chairman Jerome Powell.
The Fed Head was not pleased with Wall Street’s initial read and said not so fast, we are going to continue raising rates until inflation is slayed. Powell’s firmness sent stocks tumbling and put an end to the brief uptrend.
Fortunately, the NASDAQ did not set a new 52-week low. So, there is still a chance a new bull could emerge, but the possibility of a more aggressive bear exists too. The Mary of the Markets (the NASDAQ, where it goes the others are sure to follow), is boxed in with the 52-week low on the bottom and 11,250 on the top.
The index could bounce around between the upper and lower guardrails for a little bit with midterm elections on tap. Due to the influx of mail-in voting, some of the results could be unknown for a few days. With the House and Senate up for grabs, Wall Street could put stocks on pause until the dust settles. When the votes are finally counted, investors will have a sense of what to expect from Washington D.C.
If we had to guess, based on the same stuff everybody else is reading, the House will flip to Republican control, and they might have control of the Senate by one or two seats. Here is where we are going to make a crazy prediction, if Republicans sweep Arizona, Senator Krysten Sinema will switch parties. You heard it here first.
Back to stocks and away from cloudy political crystal ball readings. The NASDAQ isn’t guesswork and what happens next is clear. If the index busts through the top of the box, stocks pop. If the bottom falls out, stocks drop. Until then, we are in wait and see mode during range-bound trading.
Energy stocks continue to lead the way on our sector/industry performance leaderboard. Somehow, Semiconductors snuck their way to the number two position, seeming way out of position as Tech exchange-traded funds (ETFs) dominated the worst performers on our list.
If the NASDAQ manages to close to the better side of 11,250, then keep a close eye on SPDR S&P Semiconductor ETF (XSD). It’s unusual to see highly correlated sectors trade out of whack with one another. For whatever reason, Wall Street poured money into semiconductors while draining dough from just about every other tech sector/industry. In fact, XSD was the only tech ETF we monitor to finish the last week of trading in the plus column.
We so hoped to have something for this space this week but no, Jerome Powell’s comments ruined the party and any chance for us to finally highlight a company here. It will have to wait to see if the NASDAQ can tear its way through the top of the box.