Powell’s Hawkish Feedback Shake Equities
Ten days after the election, the sugar excessive and animal spirits seem like lastly carrying off. Tech shares and the Nasdaq 100 Index ETF (QQQ) lastly encountered some heavy promoting stress after feedback from Federal Reserve Chairman Jerome Powell earlier within the week. Powell stated, “The financial system isn’t sending indicators that U.S. central financial institution must be in a rush to decrease rates of interest.” Traders should perceive that markets are pushed by liquidity, particularly from the Federal Reserve. Nonetheless, contemplating the roaring rally for the reason that presidential election, Powell taking the foot off the dovish gasoline pedal is no surprise. With shares up 5% final week, some profit-taking is anticipated. Under are 5 extra causes shares will prone to discover help:
1. Technical Confluence Zone
The value motion illustrates that QQQ is retreating to a high-probability purchase zone, which features a retest of the breakout and $500 spherical quantity, a every day value hole fill, and the rising 50-day shifting common.
Picture Supply: Zacks Funding Analysis
2. OPEX
Friday is choices expiration. Typically, shares commerce funky on choices expiration days as merchants reposition.
3. Wholesome Breadth Beneath the Hood
The foremost generally inform a partial story concerning market well being. To be able to get the total story, market contributors should examine breadth (participation). Although the main indices light laborious, solely ~60% of shares have been decrease for the session. Although markets have been down, main shares like Tesla (TSLA), Coinbase (COIN), MicroStrategy (MSTR), and Root (ROOT) have been up.
4. Dramatic Sentiment Shift
This week, the “CNN Worry & Greed” indicator confirmed that sentiment plunged from “Greed” to “Impartial” ranges. Savvy buyers use sentiment as a contrarian indicator.
Picture Supply: CNN
5. Seasonality
Historic seasonality means that markets are inclined to retreat into Thanksgiving week earlier than rallying into year-end.
Backside Line
Friday’s market swoon could seem intimidating on the floor. However, a number of items of proof, together with the QQQ chart, sentiment, and seasonality recommend that the draw back will likely be restricted.
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Tesla, Inc. (TSLA) : Free Stock Analysis Report
Invesco QQQ (QQQ): ETF Research Reports
MicroStrategy Incorporated (MSTR) : Free Stock Analysis Report
Root, Inc. (ROOT) : Free Stock Analysis Report
Coinbase Global, Inc. (COIN) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the writer and don’t essentially mirror these of Nasdaq, Inc.
