Powell Turns Hawkish, QQQ $390

This week:

Bears: We have an omicron
Bulls: We have a Powell pic.twitter.com/1c4xfn8DHV

— Sven Henrich (@NorthmanTrader) November 28, 2021

FULL QUOTE FROM POWELL ON TAPER:

"At this point the economy is very strong and inflationary pressures are high. It is therefore appropriate in my view to consider wrapping up the taper of our asset purchases perhaps a few months sooner. And I expect that we will discuss that."

— Brian Chappatta (@BChappatta) November 30, 2021

Coming into this week, Omicron and its effect on Fed policy was the crucial dynamic. NorthmanTrader nicely summarized it in the above tweet. On Tuesday, Powell threw bulls for a loop when he was far more hawkish than expected in testimony before Congress, sending the market reeling.

The 3 stock rally. pic.twitter.com/vsnOoA5pTD

— Arun S. Chopra CFA CMT🧐 (@FusionptCapital) November 30, 2021

While the S&P was only down 1.90% and the NASDAQ 1.55%, it was in reality a brutal day for stocks. NYSE + NASDAQ Advancers to Decliners was 2,106 / 6,040 or 3 Decliners for every Advancer and volume of 13.5 billion was as heavy as I can recall of late – about 50% higher than Monday when stocks rallied.

Those stocks which are still strong might appear 'safe' but they are the most vulnerable…

The generals of the army get shot in the end and their demise is usually violent!

— Puru Saxena (@saxena_puru) December 1, 2021

As I wrote in yesterday’s blog, 7 stocks are propping up the entire market. The QQQ – the most important security in the market – is a good proxy for these 7. The QQQ traded in a range between $390 and $400 for almost all of November. IMO a decisive break below and failure to reclaim $390 would mean that the bull market is likely over. I wouldn’t be surprised to see it happen this week.