Market Insight - After Bear Market Rally, Selloff Continues!

Market Insight – May 19th, 2022.

• · After Bear Market Rally, Selloff Continues!
• · Target Corporation Stock dropped by 25% and the retail sector followed suit.

S&P 500

S&P 500 was up from the trough of 3860 points the lowest intraday level of the year to 4088 in what we call a short bear Market Rally. However, yesterday the index fell sharply down to 3923 points and resumed the selloff. The Bear Market Rally is an upsurge in the middle of a larger decline. It was probably a sign for the bulls that they might be up for a dreadful summer and a harder fall in the Stock Markets. Investors' Nightmare was more apparent as the Dow Jones Industrial average fell 1164.52 points about 3.6% and Nasdaq Composite dropped 4.7% compared to a 4% decline in S&P500.

The gains in the market and across the asset class were spurred by the comments from Federal Reserve Chairman Jerome Powell. He implied the Fed wouldn’t lift short-term interest rates as quickly as market fears as a step to tackle inflation. Such short-lived, upside rebounds are a characteristic of a bear market. – A drop of 20% from a recent peak. So far, the Index has avoided the Bear Market with this mini rally as the index climbed up 5.1% since last week Thursday. Then yesterday’s selloff brought the index back close to entering the bear Market zone. A close below 3837.25 would mark a 20% drop from the S&P500 all-time peak that was marked on 3^rd Jan.

The above S&P 500 chart shows that the index has dropped first below the Pivot at 4045. And then later towards the end of the session below the Key Support Level at 3960. The next session could bring the prices below Support Zone at 3840 to 3810. And the next support cluster after this is around $3500 and that is becoming quite reachable. 

Target Corporation Chart – NYSE

The selloff on Wednesday came as investors who brushed off Walmart’s disappointing results on Tuesday panicked after its rival Target Corp. TGT also revealed poor results to the market on Wednesday. Its rising labour and fuel costs brought TGT's stock price down by 24.9%. The third stock to follow the suit was Amazon.com which fell by 7.16%.

Click to see Charts of The Week：