Technical analyst Ralph Acampora, CMT, notes a number of indications that the stock market is turning bearish, with possible losses of 20% for its benchmarks. Thursday's dramatic reversal for the Nasdaq Composite, the ongoing decline of bitcoin, the increasing prospect of stagflation and negative chart signs on a number of prominent individual stocks prompt Acampora to say investors should now start watching for a bottoming pattern to emerge.
Treasury Secretary Janet Yellen says forthcoming steps to be taken by the Biden administration and Federal Reserve will bring the currently high inflation rate under control in 2022. "Inflation rose by more than most economists, including me, expected and of course it's our responsibility with the Fed to address that," Yellen said.
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Technical analyst Frank Cappelleri, CMT, joins other analysts in expressing unease over last week's stock market movements and says the fall of the Nasdaq Composite is particularly worthy of attention. The index made strong progress on Thursday, gaining 2.1% at one point, but dropped abruptly in the closing hour to end down 1.3%, its heaviest day's reversal since April 2020.
Wall Street banks believe their trading revenues will stabilize below the peaks of the last two years but higher than pre-pandemic levels. Stimulus from the Federal Reserve flooded the markets with liquidity and triggered a surge in trading during the pandemic, but banks' trading revenues took a downturn in the fourth quarter as the Fed started reducing its asset buying.
Despite a stutter late last week, the yield on the 10-year Treasury note is in a generally rapid uptrend, which could add to the proliferating near-term headwinds for equities. Technical analyst Jeff deGraaf, CMT, points out that a fast and significant yield rise is historically proven to affect stock market returns adversely, although a longer-term appraisal by eToro analyst Callie Cox indicates that stock markets prosper 12 months after a bond yield jump of this nature.
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A year after retail investors organized on social media to push the price of GameStop stock past $400, many of the issues around frenzied buying remain unaddressed. The growth of the Federal Reserve's balance sheet and consumer access to trading platforms such as Robinhood remain key ingredients for volatility.
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JPMorgan Chase Chair and CEO Jamie Dimon said at an earnings call that the bank will significantly increase its technology spending in 2022 to $12 billion. Dimon said that within the technology and the fintech space there is "a lot of competition." Jeremy Barnum, JPMorgan's chief financial officer, added that the bank was in a "moment of acceleration" of investment spending.
The Federal Reserve published a long-awaited study Thursday that outlines the benefits and risks of establishing a digital dollar, though it does not take a firm position on whether the central bank should issue such a currency. The Fed said the 40-page document is "the first step in a public discussion between the Federal Reserve and stakeholders about central bank digital currencies."
India's Nifty index was under pressure for four out of five days last week, ending with a net loss and facing support tests of the 50-day, 100-day and 20-week moving averages. Technical analyst Milan Vaishnav, CMT, stresses it is "important for the market to take support at these levels in order to avoid the current weakness turning into a prolonged corrective phase."
The pound has continued to make headway against the euro, and Credit Suisse technical analyst David Sneddon notes it is on course for a resistance test at 1.21. Pointing to a number of positive chart indications for the pair, Sneddon says a successful test could clear the way for the pound to gain further up to 1.30.
Since the dawn of investing, practitioners understood the value of contrarianism, writes Chris Diodato, CMT, CFA. In the spirit of contrarian thinking, analysts created oscillators to uncover "overbought" and "undersold" conditions in the 1950s. Some analysts then chose to look at supply and demand factors, namely volume and breadth. Diodato conducts in in-depth review of these indicators.
Advisor Adam Koos says completing the Chartered Market Technician Program was "probably the most intense but rewarding experience I've ever put myself through." He discusses his personal journey and how the program reinforces his fundamental investment philosophy: Capture as much of the upside as possible during healthy markets, while mitigating the downside in unhealthy markets.