The Stock Market Bounces Amidst Strong Headwinds

September 12, 2022

Mish's Daily

By Mish Schneider

Written by Mish Schneider


The S&P 500 was sharply oversold last week according to Our Big View weekly analysis. Hence the market bounced and cleared the 50-day moving average in all indices.

The macro backdrop for the financial system remains the same. However, with all the headwinds, can this bounce last?

First and foremost, nothing about the market's underlying fundamentals has changed.

According to the latest Refinitiv Lipper fund flow report, sellers retracted $17.5B from conventional exchange-traded funds last week. Leading the outflows were equity funds and money market fund. This marks the second straight week of outflows for both.

The fixed income ETF losers were SPDR Bloomberg High Yield Bond ETF (JNK) and the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD), as they also observed the most significant weekly outflows.

With that said, junk bonds have been an extraordinarily reliable lead indicator for risk on/risk/neutral/risk off.

To start the heavy stat driven week, what do we need junk bonds to do in order to see the equity rally continue?


Junk bonds deliver higher yields on investments as the companies in the ETF generally tend to have poor balance sheets. Therefore, if bond traders are buying junk bonds, they have confidence the market will go up.

The chart shows that while SPY is above the blue line or 50-DMA, junk bonds (JNK) are not quite there.

If some of the headwinds turn out not so disruptive (CPI lower, rail strike averted, rates remain stable, dollar does not get stronger), then we will see it in the chart of JNK.

The 50-DMA will penetrate which will embolden bulls further, possibly taking SPY closer to 420.

However, should JNK roll over and break under 93.00, we will consider that a warning to the bulls.

Investors should always keep an eye on fund flow data when making investment decisions. It can provide valuable insights into other market participants' feelings about a particular asset class or sector.

Traders can gain an advantage in the market by using MarketGauge's proprietary technical analysis tools, such as the triple play indicator, comparable market phases, downward momentum, volume analysis, and positive trend strength (TSI), and used in conjunction with the Modern Family to make better-informed trading decisions.

To learn more about how to identify trend changes using indicators and the Modern Family, reach out via chat, phone, email, or book a call with Rob Quinn, our Chief Strategy Consultant, by clicking here.

Mish’s Upcoming Seminars

ChartCon 2022 Stockcharts October 7-8th Seattle.

Join me and 16 other elite market experts for live trading rooms, fireside chats, and panel discussions

The Money Show

Join me and many wonderful speakers at the Money Show in Orlando beginning October 30th running thru November 1st-Spend Halloween with us! And this w/end is a special discount code to save $$$

Get your copy of "Plant Your Money Tree: A Guide to Growing Your Wealth"
and a special bonus here

Mish in the Media

Stockcharts TV Your Daily Five Key Outliers For The Stock Market To Watch 09-12-22

Coast to Coast with Neil Cavuto 09-12-22

Real Vision with Maggie Lake 09-10-22

NASDAQ Talks with Jill Malandrino 09-10-22

Opening Bell Cheddar TV 09-10-22

CNBC ASIA 09-08-22

Charles Payne Fox Business 09-07-22

CMC Markets London 09-07-22

ETF Summary

S&P 500 (SPY) 408.82 support and resistance 413.55

Russell 2000 (IWM) 187.29 support and resistance 190.84

Dow (DIA) Support at 322.04 and resistance 326.62

Nasdaq (QQQ) Support at 309.61 at resistance at 312.61

KRE (Regional Banks) Support at 64.12 resistance at 65.20

SMH (Semiconductors) 213 support and resistance at 220

IYT (Transportation) 236.82 support and 238.75 resistance

IBB (Biotechnology) 127.12 support 128.52 resistance

XRT (Retail) support at 66.47 and 67.75 is resistance

Improve Your Returns With 'Mish's Daily'

Michele'Mish' Schneider

Every day you'll be prepared to trade with:

  • Unique insight into the health and future trends in markets
  • Key trading levels for major ETFs
  • The 'Modern Family' advantage
  • Actionable trading ideas in stocks and ETFs across all asset classes
Subscribe Now!