The SPY And QQQ Rallied Through Resistance (Technically Speaking For 4/19)

Apr. 19, 2022 5:19 PM ETSPY, QQQ, DIA, IWM4 Comments
Hale Stewart profile picture
Hale Stewart
10.57K Followers

Summary

  • Fed President Bullard put a 75 basis point rate hike on the table.
  • Money is flowing out of aggresive-sector ETFs and into conservative-sector ETFs.
  • The SPY and QQQ rallied though resistance.

Bull and Bear Symbol with Stock Market Concept.

undefined undefined/iStock via Getty Images

Fed President Bullard is very hawkish:

Federal Reserve Bank of St. Louis President James Bullard said the central bank needs to move quickly to raise interest rates to around 3.5% this year with multiple half-point hikes and that it shouldn’t rule out rate increases of 75 basis points.

“More than 50 basis points is not my base case at this point,” Bullard said in a virtual presentation to the Council on Foreign Relations on Monday, adding the Fed under Alan Greenspan did such a hike in 1994 leading to a decade-long expansion. “I wouldn’t rule it out, but it is not my base case here.”

This chart (or one similar to it) is probably what's spooking him.

3, 6, and12-month average Y/Y percentage change in total and core CPI

3, 6, and12-month average Y/Y percentage change in total and core CPI (Data from FRED; author's calculations)

The Fed uses averages when looking at prices, which prevents one month of data from skewing the analysis. Unfortunately, all the averages for the core and total CPI data are sharply rising at sharp rates. There are no signs of plateauing, either.

The World Bank cut its global growth forecast:

The World Bank cut its forecast for global economic expansion this year on Russia’s invasion of Ukraine and is planning to mobilize a funding package bigger than the Covid-19 response for nations to deal with various resulting and ongoing crises.

The Washington-based institution has lowered its estimate for global growth in 2022 to 3.2% from a January prediction of 4.1%, President David Malpass told reporters on a call on Monday. The decline was spurred by a cut in the outlook for Europe and central Asia, which include Russia and Ukraine, he said. The global forecast for this year compares with 5.7% expansion in 2021, he said.

The IMF followed suit earlier today:

Compared to our January forecast, we have revised our projection for global growth downwards to 3.6 percent in both 2022 and 2023. This reflects the direct impact of the war on Ukraine and sanctions on Russia, with both countries projected to experience steep contractions. This year’s growth outlook for the European Union has been revised downward by 1.1 percentage points due to the indirect effects of the war, making it the second largest contributor to the overall downward revision.

This is not a surprising development. The war in Ukraine has taught us that Ukraine is a major agricultural exporter while reminding us that Russia is a major energy player.

Year to date fund flows tell an important story

SPY, QQQ, DIA, and IWM fund flows

SPY, QQQ, DIA, and IWM fund flows (ETF.com)

Money is flowing out of the large index-tracking ETFs.

YTD Money flows for major sector ETFs

YTD Money flows for major sector ETFs (ETF.com)

Money is flowing out of more aggressive ETFs and into more conservative ETFs.

Let's take a look at a few sets of charts

1-Day SPY, QQQ, DIA, and IWM

1-Day SPY, QQQ, DIA, and IWM (Stockcharts)

The markets rallied right out of the gate. Most of the gains were baked in by the late morning. The best thing about these charts is that prices didn't drop at the close, meaning traders were comfortable holding positions overnight.

1-month SPY, QQQ, DIA, and IWM

1-month SPY, QQQ, DIA, and IWM (Stockcharts)

The SPY and QQQ broke through resistance today, printing solid rallies. The DIA and IWM are right at resistance.

Today was a solid turnaround for the markets. As always -- the real issue of follow-through. Let's hope it continues tomorrow.

This article was written by

Hale Stewart profile picture
10.57K Followers
Hale Stewart spent 5 years as a bond broker in the late 1990s before returning to law school in the early 2000s. He is currently a tax lawyer in Houston, Texas. He has an LLM in domestic and international taxation (MagnaCumLaude). He is the author of the book The Lifetime Income Security Solution. Follow me on Twitter at @originalbonddadYou can read his legal analysis on his law office's blog.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such 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.

Recommended For You

Comments (4)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.