EB Special Market Report

It's been an extremely volatile day, so I wanted to give you a quick update on what I'm seeing.

First, the good news. We have seen a very nice intraday reversal after violent selling earlier, especially in those growth names. This reversal is occurring on very heavy capitulatory-type volume, but the strength must hold into the close today. Should the market turn lower again this afternoon, then further selling could be in store.

Additionally, I believe the better-than-expected jobs report is further confirmation of a strengthening economy ahead. While the headlines have centered on higher interest rates, we should all keep in mind that rising interest rates because of increasing economic strength ahead is FINE, especially at these ridiculously low levels. What's not good is rising interest rates because of inflationary pressures. Fed Chair Jerome Powell has indicated that the Fed believes the current spike in inflation is temporary. If they're right, then this truly is nirvana for U.S. equities.

As I look at the market, clearly I find today's reversal, if it continues or at least holds, is a major positive. But the two charts that I believe are even more important to the "growth" theme are the IWF:IWD and QQQ:SPY. I'm watching an intraday 5 day, 10 minute chart of each to see if money ROTATES. A rebound is nice, but we're not out of the woods until we see money begin to ROTATE back into the IWF and QQQ relative to the IWD and SPY, respectively. Here are those two charts:

IWF vs. IWD:

QQQ vs. SPY:

While finishing in positive territory would be a great start after early selling, the above two charts are really the ones to watch. Will we see ROTATION back into growth stocks and the NASDAQ?

Happy trading!

Tom