3 Fundamental Reasons The Stock Market Can Break (Video) (NYSEARCA:SPY)

Summary

Technicals look healthy but may have hit some resistance.
There's three obvious fundamental reasons to potentially break this market.
But let's see if we get directional confirmation.
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The market (NYSEARCA:NYSEARCA:SPY) has traded sideways for a week or so. I've been saying it's important to respect direction as a guide for trading. So sideways isn't a great guide. Still I think there's three fundamental reasons building that can potentially drive the next move lower.

In this video I'll tell you what I'm watching and what I need to happen. I'll also talk about how to confirm a follow through.

First Reason For Stock Market Break: Taper

The first reason has to do with a big Fed taper. Even though these numbers are still huge, there's still a taper going on.

They went from $60B a day in buying a few weeks ago to now to now $6B-7B a day. That's way down. These are huge numbers still but way down. I think that has the risk to soften up the market on any bad news.

	Total	Per Week	Per Day
2020-04-01	$4,768,238,706,062	$432,227,323,097	$61,746,760,442
2020-04-8	$5,060,118,230,012	$291,879,523,950	$41,697,074,850
2020-04-15	$5,319,687,288,500	$259,569,058,488	$37,081,294,070
2020-04-22	$5,492,341,792,900	$172,654,504,400	$24,664,929,200
2020-04-30	$5,534,933,870,549	$42,592,077,649	$6,084,582,521
2020-05-07	$5,583,378,870,000	$48,445,001,000	$6,920,714,429

Source

Second Reason For Stock Market Break: Fundamentals

Non-farm payrolls are below. They report tomorrow.

Source

Fed officials have been warning us all week for a key non-farm payroll number reported tomorrow. In tandem with the Fed taper, there's a chance stocks can actually trade weak on bad news.

Third Reason For Stock Market Break: Trump

President Trump said he plans to retaliate against China for allegedly purposely releasing the coronavirus. That has not hit the market because there's been no official move, just threats. But when we get something more official I think there's a good chance for a break.

Conclusion

Technicals have looked fine but fundamental factors have been building potentially to give this market a breakdown below this sideways trend. In this video I'll let you know what simple key indicators I'd be watching.

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This article was written by

Elazar Advisors, LLC

17.18K Followers

Hi, I'm Chaim Siegel. I've run Elazar since inception. I've worked for big hedge funds as a trader, analyst, PM and water boy.
Starting out I could make a mean straight black coffee. But ask me to add some sugar or milk though was a problem. So they got fed up and said, just give him some stocks to follow. That was in the 90s tech boom. Yeah. That worked out.
So, now, mid-life crisis I enjoy second guessing the Fed, which is usually a good strategy. They are not traders, they have no risk discipline, they are having way too much fun with this QE-QT thing and because of their powerful position, are usually way too over-confident in their decision making which is a hint to bad decision making.
My customers have seen that I've been net net pretty good at consistently second guessing the Fed.
Our EPS estimates factor into Street numbers.
I've been on CNBC and a few other places.
But mostly I really just enjoy second guessing the Fed and keeping it simple.
Wishing you all continued success.
https://seekingalpha.com/mp/1072-the-fed-trader/articles

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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