Outsized Rallies Continue to Fail

(3/10/22) The NASDAQ chalked up a 3% gain, and he S&P bounded nearly as much in the biggest one-day gain we've seen in a while. But even with this volatile behavior, markets have been in a consistent decline since January. The out-sized rallies have continued to fail--a hallmark of the correctional process. Below the surface of the average, individual companies are recording losses of up to 30- and 40% off their peaks. The S&P is being sustained by larger companies with the wherewithal to buy back their stocks. Amazon announced a 20:1 stock split and a buy-back program worth $10-B. Thanks to Amazon's effect on market weighting, this activity will further buoy the S&P and NASDAQ. Markets on Wednesday failed to reclaim support at previous levels, closing right at that support level, and as markets open lower this morning, that previous support level will be critical. Markets are over-sold, but not dramatically so, and fuel remains for a bigger correction to the downside. Next week's Fed meeting will be held in the context of what's happening in Russia/Ukraine, and whether OPEC will increase production. Any "good" news could change this dynamic. The big issue between a 10% correction and a rally to new highs is whether the economy falls into recession this year.
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