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Home ANALYSIS

Major indices close with solid gains and near highs.

A.R Chowdhury by A.R Chowdhury
March 22, 2022
Reading Time: 7 mins read
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Major indices close with solid gains and near highs.

On March 14, the Nasdaq closed below the February swing low at 12587.88 and reached a new low for 2022 at 12555.35. Since then, the price has moved up 12.41%. The S&P index is up 8.35% over that time.

The moves to the upside comes amidst a rise in 10 year yields from 2.02% to 2.39% currently or 37%.

The correlation with yields and the  Nasdaq 
NASDAQ

The Nasdaq Stock Market or NASDAQ is an American stock exchange. It trails only the New York Stock Exchange (NYSE) in market capitalization and is part of a network of stock markets and options exchanges.Launched back in 1971, NASDAQ is the acronym for the National Association of Securities Dealers Automated Quotations. Since then it is known simply as NASDAQ and has become one of the most influential exchanges worldwide.The NASDAQ was the world’s first electronic stock market, and has since assumed the majority of major trades that had been executed by the over-the-counter (OTC) system of trading.What Makes Up the NASDAQ?In particular, the exchange also features the NASDAQ Composite, which includes almost all stocks listed on the NASDAQ stock market. Along with the Dow Jones Industrial Average (DIJA) and S&P 500 Index, this is one of the three most-followed stock market indices in the United States.Overall, the NASDAQ stock market has three different market tiers. This includes the Capital Market, or an equity market for companies that have relatively small levels of market capitalization. The listing requirements for small cap companies are less stringent than for other Nasdaq markets that list larger companies with significantly higher market capitalization.Additionally, the Global Market is made up of stocks that represent the Nasdaq Global Market. The Global Market consists of 1,450 stocks that meet the exchange’s financial and liquidity requirements, and corporate governance standards.Finally, the Global Select Market is a market capitalization-weighted index made up of 1,200 US-based and international stocks that represent the Global Select Market Composite.

The Nasdaq Stock Market or NASDAQ is an American stock exchange. It trails only the New York Stock Exchange (NYSE) in market capitalization and is part of a network of stock markets and options exchanges.Launched back in 1971, NASDAQ is the acronym for the National Association of Securities Dealers Automated Quotations. Since then it is known simply as NASDAQ and has become one of the most influential exchanges worldwide.The NASDAQ was the world’s first electronic stock market, and has since assumed the majority of major trades that had been executed by the over-the-counter (OTC) system of trading.What Makes Up the NASDAQ?In particular, the exchange also features the NASDAQ Composite, which includes almost all stocks listed on the NASDAQ stock market. Along with the Dow Jones Industrial Average (DIJA) and S&P 500 Index, this is one of the three most-followed stock market indices in the United States.Overall, the NASDAQ stock market has three different market tiers. This includes the Capital Market, or an equity market for companies that have relatively small levels of market capitalization. The listing requirements for small cap companies are less stringent than for other Nasdaq markets that list larger companies with significantly higher market capitalization.Additionally, the Global Market is made up of stocks that represent the Nasdaq Global Market. The Global Market consists of 1,450 stocks that meet the exchange’s financial and liquidity requirements, and corporate governance standards.Finally, the Global Select Market is a market capitalization-weighted index made up of 1,200 US-based and international stocks that represent the Global Select Market Composite.
Read this Term
has flipped entirely around as investors are either getting squeezed, AND/OR the hope is that higher yields means continued strong economy despite the headwinds from higher rates and  inflation 
Inflation

Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.

Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.
Read this Term
.

The market may also discounting a solution to the Ukraine war which would be a positive if it frees up the oil and other commodities.

As the seasoned Wall Street traders like to say “Don’t fight the tape”.

Despite the gains in the NASDAQ, the price had been beaten down, and the rise in that index is still on the lower half of the high to low range since November.

Looking at the daily chart below, the price yesterday moved to a high near the 38.2% retracement at 13952.28, but backed off. Today, the index opened higher and continued higher.

The next target comes in at the 14163.73 to 14181.69 (swing high from February 15 and the swing low from going back to October 4, 2021). A move above those levels would next target the midpoint of the range since the November high at 14383.79. Get in the upper half and the technical picture is more brighter – despite the run up in yields.

NASDAQ index

For the S&P index, it moved and closed above the 200 day moving average at 4473.11. It also moved above and closed above the 50% of the range since the the January all-time high near that midpoint level comes in at 4466.64. The next target comes in at the 100 day MA at 4549.62.

S&P

The final numbers today are showing:

  • Dow industrial average rose 254.45 points or 0.74% at 34807.45
  • S&P index rose 50.43 points or 1.13% at 4511.60
  • NASDAQ index rose 270.37 points or 1.95% at 14108.83
  • Russell 2000 rose 22.40 points or 1.08% at 2088.34.

Please strong day across the board for the major indices with gains of greater than 1% to near 2%.

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A.R Chowdhury

A.R Chowdhury

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