Markets suffered a waterfall of selling on Thursday and Friday, and indications are that it will continue this morning primarily due to concerns that a lockdown may be imposed in Beijing, China. Millions of residents are being tested, and some areas of the city are already being shut down.
Oil and commodities are being hit hard by concerns that the Chinese economy will continue to slow. Concerns about supply chains remain extremely high, and the crisis in Beijing just adds more concern.
The negative news is hitting as the market is already struggling with some severe technical damage. The selling on Thursday and Friday was extremely steady, but the volume was fairly light, and it didn't look like the sort of panic that often leads to a bottom. On the other hand, sentiment is becoming quite extreme, and many market participants are throwing in the towel.
It is a bleak picture, and it is hitting as the most important earnings reports of the quarter start to hit this week. Microsoft (MSFT) and Alphabet (GOOGL) report on Tuesday night, Meta (FB) is on Wednesday, and Apple (AAPL) is on Thursday.
The key to all the earnings reports at this point is going to be guidance and insight into how they are navigating supply chain issues, inflation, and the potential for slowing growth. We have seen generally poor responses to earnings so far this quarter, and forecasts about the future are likely to remain very murky and conservative.
It is bear market action, and that means we need to protect capital and stay on watch for the potential for some counter-trend moves. This is some of the worst action in many years, but the biggest positive is that it is already tremendously negative, and the news flow simply can't get much worse. The market is trying to discount all the negatives out there, and it is a process that takes some time.