QQQ led the major indices to the downside on January 5, 2022. This is a common theme where once high-flying tech growth stocks are selling off and pulling the broader market down with it.
Growth Slowing Down By Design
The Federal Reserve is slowing down growth and that means growth stocks will lead the sell-off as we are seeing.
With the Fed tapering and rate hike schedule for 2022, it is unlikely that the government will replicate last year’s massive economic stimulus payouts to the public. That means that in order for the economy to grow and not contract, the economy will have to make up for the economic stimulus shortfall in 2022. How is the economy supposed to do that when the Fed is hiking rates?
Notice the sideways consolidation channel. Institutional investors are selling into upward swings and they’ve been doing so since early November 2021. This “sell the rip” mentality is why the stock market is unable to sustain an uptrend.
The MACD has gone negative and is giving a sell signal for the first time since late November 2021. The Money Flow is threatening to go negative which would indicate a larger correction after the sideways channel breakdown.
Pivot Levels For QQQ
The following are the pivot points for QQQ on January 6, 2022. Pivot High: $390.09, Pivot Low: $378.23. These were calculated using the DeMark method. It is generally believed to be bullish when price breaks out above the pivot high or bearish when price breaks down below the pivot low.
📺Markets sell off after Fed minutes
Fed’s Plunge Protection Team
The Federal Reserve has acted as a plunge protection team for years. Each time the market is on the precipice of a major correction, the Fed steps in with bullish commentary that institutional investors like Vanguard and Blackrock like. Will the Fed do it again? The next couple of days should give us the answer.
High Yield Debt
HYG is leading the market sell-off where the Money Flow has clearly broken below the zero line.
We recommended to all Premium Members that they move to cash on January 6, 2022, while we watch what the market does over the coming days and weeks.