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Second Consecutive Wild Ride in the Stock Markets, This Time Closing Lower

For the second day the DOW was down 1000 points and recovered all of it. Yesterday the Dow and S&P closed higher, today, all major indexes closed lower.
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Nasdaq 100 Index Chart courtesy of Stockcharts.Com, Annotations by Mish

Nasdaq 100 Index Chart courtesy of Stockcharts.Com, Annotations by Mish

Two days ago the Nasdaq had an 807 point bottom-to-top rally to close slightly in the green. 

Today, the index had a bottom-to-top rally of 377 points but closed 360 points lower, down about 2.48%.

DOW - Last 7 Days    

Dow Jones Industrial Chart Courtesy of StockCharts.Com, Annotated by Mish

Dow Jones Industrial Chart Courtesy of StockCharts.Com, Annotated by Mish

In each of the past two days, the DOW had two bottom-to-top moves of approximately 1,000 points. 

The net result is the index closed about where it did two days ago. For the day, the DOW closed about 67 points lower, down about 0.19%. 

S&P 500 - Last 7 Days

Wild Ride S&P Style 2022-1-25

Two days ago the S&P 500 had an 195 point bottom-to-top rally to close slightly in the green.

Today, the index had a bottom-to-top rally of 104 points but closing 54 points lower, down about 1.22%.

Warning! 

Beware, these moves are signs liquidity is drying up. Also beware of short covering rallies that go nowhere. 

Shorts eventually have to cover and often do so at major support levels or after multiple down days. 

Rally failures are a sign of supply. Look back further. There were rally failures three of the last four days.

Expect More Down

The rally yesterday already collapsed today.  I expect more down in 2022, lots more down.

For discussion, please see my post on January 24, Stocks Hammered with the Nasdaq Plunging Again as Liquidity Dries Up

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A 40% decline from the tops is the bare minimum of what I expect. That's how insanely overvalued stocks are.

If so, this plunge from the January highs is barely a down pay on what's coming.

Blame the Fed for Inflationary Bubbles

The Fed is largely responsible for blowing these bubbles. Congress helped with three rounds of fiscal stimulus in which the Fed sat twiddling its thumbs. 

For good measure blame the Fed for ignoring inflation that been spitting in the Fed's face for years. That's how bubbles brew. 

Instead, people will likely blame the Fed for aggressively hiking even though the Fed has not gotten in a single hike yet. Heck, it has not even finished tapering. 

Home Prices Jump Another Percent, Fed Extremely Behind the Inflation Curve

The Fed has little choice now but to hike. 

Many people think the Fed will keep hiking until it breaks something. 

I have news. The markets and the economy are already broken by the Fed's policy errors. 

For discussion of how bad inflation really is, please see Home Prices Jump Another Percent, Fed Extremely Behind the Inflation Curve

Home prices rise another percent according to Case-Shiller. The Fed does not even count that as inflation.

The seeds of decline were sown in bubbles already blown. It's far too late for the Fed to prevent another deflationary asset bubble collapse.

This post originally appeared at MishTalk.Com

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