Searching for Support

With the tech sector under the microscope markets continue to search for support as stocks slide with rising rates.

We’ve discussed (warned?) about this for a long time. Tech has grown to be a disproportionately large portion of the major indexes. So, if tech has a bad day, everybody has a bad day.

Of course, in this scenario, everyone seems to be having a bad day. The Fed has announced higher rates are coming. Now everyone is guessing as to just how high those rates will go and how much QT (quantitative tightening) the markets must price in.

The Fed may be backed into a corner on this one. With all the stimulus and Covid money dumped into the economy inflation has finally taken hold. Businesses can’t find workers for many service jobs. Supply chains are still broken. So rates, pragmatically, must go up if we’re to find any kind of stability in this situation.

The Feds suggested three rate hikes to start. Markets are suggesting much more than that though.

Judging from the rapid rise in price of food, energy, housing, labor, and just about everything else, the Fed may be the ones playing Pollyanna right now. Most investors under age 60 don’t have any knowledge outside of history books for how this worked before. And even then, what drove the prices higher in the 1970’s is not the same force the market is experiencing today.

Looking out too far is a fool’s errand right now. There is no telling if this market finds a foothold or falls. If sentiment continues to shift, things may continue to decline from here. The futures are indicating this is the start to the week.

It appears the next area of support for the S&P 500 is between 4531-to-4545. If that area is breached, it’s probably down to 4595. With the trend so decidedly negative right now, there’s very little up-side resistance to this market. The much bigger concern at this point is a sell-off.

This week is a shorter week because of yesterday’s closure on MLK day. Look for higher volatility this week. The big news day will probably be Thursday this week, so the whole week could be a bit of a wild ride. Hang in there!

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by BigFoot), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from BigFoot. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the BigFoot’s current written disclosure statement discussing our advisory services and fees is available for review upon request.