Taper Tantrum on the Street

It is very easy to understand what the market has already done but very difficult to comprehend what the market is trying to do. Here are the market observations for today

1. The market has a new reason to worry: Will the US Fed remove the stimulus this year?
2. Yesterday, the indices collapsed by the end of the day due to fear of Taper Tantrum. It means the Fed is thinking of reducing the pace of its purchases of Treasury bonds, reducing the amount of money it is feeding into the economy.
3. What is Taper Tantrum?. It resulted in a big sell-off in 2013
4. Another Source of worry: Economic slowdown due to Delta variant. Goldman Sachs has cut its economic growth forecast for the current quarter to 5.5% from 9%
5. Economic slowdown is having impact on commodities. Crude Oil has been declining for days now. Brent Crude has slipped to $66. It was $76 just 20 days back. This is causing a big sell-off in Oil names be Exxon Mobil, RIG. All these stocks are avoid now.
6. Loss of political capital of Biden creates doubt about Infrastructure Bill. It is leading to sell off in metal stocks. CLF down 9% today. Is the damage permanent? I don’t know. The bulls will hope as long as the stock holds 100 dma.
7. US Steel another false breakout. The stock tanks 8% today. I would cut the loss and move on.
8. The market has opened gap down and recovering from the lows. What’s driving the market higher? Large Cap Tech stocks. XLK ETF is up 1.16%. AMD is trading above $104 :). NVidia is up 6%.
9. The leveraged Semiconductor ETF SOXL is up 2.9% today. It’s bouncing from 200 dma
10. Bullish hope: The Fed will calm down the market. The next FOMC policy decision is on Sept. 22. But the good news is that Federal Reserve Chair Jerome Powell will speak at Jackson Hole next week.
11. Apple stock has bounced 17% from 200 dma over the last 2.5 months. It has a resistance at $150 to cross
12. The stock prices makes a violent move in the direction of surprise. Macy’s has delivered a stunning earnings surprise and the stock is a buy now. Here’s why
13. It is not what the company has done. It is what the company will do that drives prices. Macy’s now projects full-year 2021 EPS of $3.41-$3.75 vs. $1.71-$2.12 prior
14. Fundamentally speaking – Unity Software is the business and the stock to watch. One can hope that the stock will hold $115.
15. Unity software is the best play on gaming and Augmented/Virtual reality. The company provides tools and software to assist developers in game creation and marketing. In 2019, over 50% of the top 1,000 mobile games were created using Unity.
16. Emerging Market EEM has broken the horizontal support line of 50 – the level where it always found support since Dec 2020.
17. Why Stop Loss matters because stocks can fall a lot. Look at Las Vegas Sands LVS
18. When a stock does gap down on earnings, then it’s generally a start of a bigger decline. Look at Pinterest PINS
19. One group of stocks should be avoided at all cost: Chinese stocks. Alibaba now at $162
20. Trading is very personal and sometimes when things are not going your way, it makes sense to stop trading for a few days/weeks. Take that time to learn what’s causing the problem – you or the market

I will make more updates in the comments section for today. So keep looking

Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purposes. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers