POWELL’S HAWKISHNESS SPARKS SELLOFF DUE TO POSITIVE POSITIONING

Hawkish Powell

Please click here for a chart of Nasdaq 100 ETF (QQQ).

Note the following:

• In the Morning Capsule, we shared with you that Wall Street was positioned for a rally going into Powell’s testimony.
• The chart shows when Powell began testifying before the Senate committee.
• In the Interim Capsule, we wrote:

Powell’s prepared statement is hawkish.  The statement is carefully written, leaving little room to twist Powell’s words.

• Powell caught Wall Street on the wrong foot. The hope that momo gurus would be able to twist Powell’s words to persuade the momo crowd to buy stocks has not materialized because Powell was so careful to not allow his words to be twisted.
• Here are the key points from Powell’s testimony:
  • The social costs of not getting inflation under control are very high.
  • The terminal interest rate is likely to be higher than previously expected.
  • Depending on the data, the Fed is prepared to increase the speed of interest rate hikes and maintain a restrictive rate for “some time.”
  • The data does not indicate that the Fed has overtightened.
• The chart shows the momo crowd bought on the dip from Powell’s testimony.
• The chart shows when the Treasury auction results were announced.  The auction was good.  Here are the results:
  • $40B 3-year Treasury note auction
  • High yield: 4.635% (When-Issued: 4.641%)
  • Bid-to-cover: 2.73
  • Indirect bid: 62.5%
  • Direct bid: 20.7%
• The chart shows that finally, the buying could not hold the stock market from falling.
• One of the big concerns for the stock market is that the yield on 2-year Treasuries has crossed above 5%.  2-year Treasuries are now trading at 5.006%.
• Another concern is that the yield on 6-month Treasuries has now risen to 5.29%.
• The U.S. dollar has risen 1.18% and is now at the highest level in 3 months.  This is going to be a significant headwind for U.S. stocks.  
• The stock market has fallen below the key S&P 500 level of 4,000.
• The VUD indicator is the most sensitive measure of net supply demand in real-time. The orange represents net supply and the green represents net demand.
• The VUD indicator is strongly orange, indicating net supply of stocks.
• Prudent investors will be paying close attention to key economic data set to be released before the March FOMC meeting.

Money Flows

The momo crowd money flows since the Morning Capsule are (To see the locked content, please take a 30 day free trial)🔒.

Smart money flows since the Morning Capsule are 🔒.

Short squeeze money flows are 🔒.

A Special Note To New Subscribers

Note the smart money behavior.  Smart money tends to sell into strength on strong up days.

New subscribers should consider adopting smart money’s way of investing and trading.

Sentiment

Sentiment is 🔒.

Sentiment is a contrary indicator at extremes.  In plain English, this means that when sentiment becomes extremely positive it is time to sell and when sentiment becomes extremely negative it is time to buy.

Close

There appear to be sell on close orders.

There is merit to watching the pattern of market on close orders as they represent the day’s dominant net cumulative activity by many professionals and funds.

Gold

The momo crowd money flows in gold are 🔒 since the Morning Capsule.

Smart money flows are 🔒 in gold since the Morning Capsule.

Oil

China’s oil imports fell 10.2% vs. 5.1% consensus. This is putting pressure on oil.

The momo crowd money flows in oil are 🔒 since the Morning Capsule.

Smart money flows in oil are 🔒 since the Morning Capsule.

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Nigam Arora

Nigam Arora is known for his accurate stock market calls. Nigam is a distinguished master of the macro. He is a popular columnist with over 100 million page views, an engineer, and nuclear physicist by background. Nigam has founded two Inc. 500 fastest growing companies and has been involved in over 50 entrepreneurial ventures. He is the developer of Theory ZYX of Successful Change Management and is the author of the book on Theory ZYX, as well as the developer of the ZYX Change Method for Investing.

Dr. Natasha Arora

Dr. Natasha Arora has significant expertise in investment analysis especially biotech, healthcare, and technology. Natasha is a graduate of Harvard Medical School followed by a postdoc at MIT. She has published several peer reviewed research papers in top science journals.