Has More Chaos Stalled The Market Rally?
The roller-coaster ride in the stock market has continued as Friday's seemingly positive reduction in the tariffs on electric goods was deemed temporary on Sunday before the markets opened on Monday.
China's new policy on not accepting the delivery of Boeing jets was announced early Tuesday which is a further sign that the trade war is heating up not cooling down. The new rhetoric on pharma tariffs once again does not exhibit any real understanding of what new tariffs might mean.
In Tuesday's CNBC interview with former CDA Commissioner with Dr. Scott Gottlieb, he revealed that 'just about 70% of the key ingredients, key chemicals substances that are used' to make widely used generic drugs all originate in China.
The former FDA Commissioner is concerned that additional tariffs on some of these life-saving drugs, which have a small profit margin, will not continue to be produced because of new tariffs.
After the market closed a regulatory filing by NVIDIA Corp. (NVDA) reported that the US 'required required licenses for exports to China of the company's H20 artificial intelligence chip. The chip giant said the move would result in $5.5 billion in charges to the company.'
In early trading Wednesday NVDA is down 6.7%, trading at $104.71which is down $7.50 from Tuesday's close. There had been some signs over the past few days that the rebound was losing upside momentum.
QQQ
Many stocks opened very strong on Monday as there were hopes the Friday announcement of lower tariffs might be a sign of progress. The Invesco QQQ Trust (QQQ) had closed on Friday at $454.40 but opened Monday at $464.46 which was 2.2% higher. QQQ closed Monday at $457.48 which was well below the day's high of $465.05.
On Tuesday the QQQ again traded above the 20-day EMA at $461.32 but closed at $457.99. There is chart support to watch at Friday's low of $441.33 with the monthly S1 pivot support at $446.74.
The Nasdaq 100 A/D line has just rebounded back to its EMA as it closed just above it on Tuesday. If the QQQ A/D numbers are negative on Wednesday it will be consistent with a failing rally. There is support at the recent lows and then the uptrend, line c. The AD line needs to move above the downtrend, line b, to signal that the correction in QQQ is over.
The relative performance (RS) is above its EMA but it needs to overcome the recent highs to indicate that QQQ is now leading the SPY. A move above the major RS resistance at line d is needed to confirm that QQQ is leading the SPY.
NYSE Composite
The loss of upside momentum was also evident on the more broadly-based NYSE Composite as it closed Tuesday on the day's lows as it failed to reach the 20-day EMA at 18,663. There is further chart resistance, line a, in the 18,818 area.
The NYSE McClellan Oscillator rallied from the April 8th low to close Tuesday just above zero at +10.59. The downtrend at line b needs to be overcome to signal a further rally. The NYSE All Advance/Decline line has rallied from the recent lows but is still below the declining EMA and resistance at line d. The downtrend in the A/D line (line c) needs to be overcome to turn it positive.
The S&P futures are down 41 points at 8:30 AM ETF which is an hour before the open. Of course, it is the close that will be more important. If the stock market declines sharply for a few days it will hopefully encourage a return to sanity before there are new ill-informed tariffs on the pharma industry.
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