Issue 6 – No Capitulation Just Going Back To Where We Were

In the first 2 days of this week, investors extended the Thursday-Friday turnaround in the stock market from the previous week into a powerful rally, which ended on Wednesday. In just 4 days the S&P 500 jumped 262 points or 6.1%. Unfortunately, the fallout from Facebook’s dramatic post-earnings miss and concerns over Apple’s new privacy ad-policy plunged Meta Platforms by 25% torpedoing the market on Thursday, thereby undermining risk sentiment and threatening to upend the nascent rally. On Friday morning, Amazon launched a rescue mission, crushing earnings expectations and doubling its net income from a year earlier. This worked successfully and was better than expected. The skew index, a gauge that measures tail risk anxiety, decreased to 129.0. Overall the broad benchmark rose 69 points or 1.6% to end at 4501. Despite the distressing jolt in the market during the opening weeks of 2022, there’s been no capitulation and no massive allocation shift away from stocks. More than $20 billion flowed into equities last week, bringing the year-to-date inflow to $106 billion. The market is currently sandwiched between support (4300) and resistance (4625): the 50-DMA versus the 200-DMA. The market is in a tug of war between bulls and bears.


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By Hubert Marleau

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By Hubert Marleau

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