Stocks gapped down, and bonds gapped higher at the open as recession fears continued to build, but reassuring comments from Fed Chair Powell caused an energetic reversal.
Powell is testifying before the Senate today and continues to state that the economy is strong enough that a recession can be avoided even when the Fed is aggressively hiking rates. Powell says the Fed will stay highly reactive as conditions shift.
The market has been battling back and forth between concerns about inflation and worries about a recession. When inflation concerns drop, they tend to be more worried about recession and vice versa.
Bulls are hopeful that there is enough negativity to provide some support and generate further bounce action, but without the help of a more friendly Fed, it is tough to bet on sustained upside at this point.
Volume on this coming Friday is likely to be the heaviest of the year. This is due to the rebalancing of the Russell indexes as well as so adjustment to other indexes as well. There will be huge blocks traded at the close when index funds add the new positions.
This action is not easy to game, but I am watching a few names that have attractive charts to see if there is some movement in front of the news.
One of my favorite small-caps that is being added to the Russell 2000 is Ondas Holdings (ONDS) which makes industrial drones and has technology in railroad communications. The chart is just ok, and I'm watching to see if there is some increased accumulation before the close on Friday.
There are quite a few other names that are being added, but the manner in which these shares are accumulated by brokers for the index funds is highly complex and doesn't guarantee positive price movement.
Overall, I view this as a market for trading. There still is little reason to build longer-term positions.
