Dow tumbles, S&P 500 flashing a warning signal: Market takeaways

The Dow Jones Industrial Average (^DJI) shed 605 points on Thursday, largely due to a steep decline in Boeing (BA) shares. The company's CFO issued a warning about cash flow burn, sending the stock tumbling more than 7%.

Yahoo Finance's Jared Blikre shares his market takeaways for May 23rd, including why the S&P 500 (^GSPC) may be showing "a yellow flashing signal."

For more expert insight and the latest market action, click here to watch this full episode of Asking for a Trend.

This post was written by Stephanie Mikulich.

Video transcript

A while Day on Wall Street, stocks close in the day lower even as the NASDAQ and the S and P 500 hit record highs earlier in the session.

Jared Blier is here with the takeaways of the trading day.

Jared!

Thank you, Josh.

I'm going to start with the flash PM IS that we got at 9:45 a.m. usually not a market moving report.

But we did see it move the market this morning, mainly the bond market.

And we saw yields which were negative on the day down a couple of basis points surge 45 basis points.

So have an interesting quote here from the purveyor of the report.

This is S and P. What's interesting is that the main inflationary impetus is now coming from manufacturing rather than services, meaning rates of inflation for costs and selling Prices are now somewhat elevated by pre pandemic stem sense standards in both sectors.

To suggest that the final, the final mile down to the Fed's 2% target seems elusive.

So we're talking about we've been talking about manufacturing strength, of yielding to services strength, and now, with the latest few reports here, we do see the good sector picking up again.

So what's the Fed to do?

This is the question.

So that was my question.

Do you see this, Jared?

As sort of.

Was it kind of one more data point to the to you of?

OK, getting back to Jay Powell's 2% target may be a tougher slog than some people had expected.

Yeah, I think a lot of the evidence nowadays is pointed to that one hiccup after another.

Now, the city economic surprises.

Those have been trending down.

So US economic data has been a little weak.

And that has kind of buoyed the notion that the Fed can cut rates.

However, we keep seeing these outliers.

And this one was a big one today, just judging by the market movement.

All right, let's get to the next Jared Blier bullet point here.

You bet.

We're looking at the vics here, and I'm gonna put up a chart of the vics now.

We open the day at the lowest point of the year.

This is a three month chart.

I'll put a year to date chart on this was the lowest point of the year.

And so the vics when you have a low amount, that just means there's that was a reversal there.

Yes, this is a big reversal.

Let me just put a two month chart so you can see this candle here.

That's a pretty big candle.

Now the reverse.

The VIX is often times the reverse of the equities market.

So if we look at the S and P 500 the benchmark stock index there is that big red candle.

This was a record high.

Sometimes you gap to a record high, and that just means you open at a lower at a higher price than the day before and then you trend down.

Well, this can be a reversal signal.

Um, here's a year to date chart.

You can see we had one of these candles after it wasn't a record high, but it was a very similar situation.

So we've seen this before.

A lot of times.

These candles happen at highs.

I don't want to.

I don't want to raise the alarm bells too soon because it depends on what happens tomorrow and the next day, but could be a top here that short term.

That was my question is, you look at that chart, Jared, What is sort of the signal that's sending to viewers right now, This is a yellow flashing signal to me.

So this tells me that I need to be on alert the next couple of days for some more down action because we may be in a distribution top right here, similar to what we saw.

Now this doesn't mean that we're going to enter a bear market, and that's a whole other conversation, because this was definitely not a bear market.

But all I'm saying is that after a run up like this, we might be due for a pause.

And then just based on what we saw in the semiconductors, we can take a look at that in a second.

Well, it's just kind of more evidence for that.

Let's go to the next bullet point.

Let's go to the semis.

You bet.

So I've been watching.

Actually, today is 1/100 market day of the year, and so what?

I'm looking at copper and chips because both are actually up 23% this year, so I'm gonna show you a chart of both put together.

And it's funny because chart because uh, copper and chip stocks.

They kind of go together.

We saw this recent run up in copper and here copper is in light blue.

And here, the Philly, the Philly Semiconductor indexes in purple.

But you can see both of these have ended up on the same price.

That's just coincidence or the same return amount for the year.

That's just a coincidence, but they are related.

And so I thought, This there's a relation.

So you're saying there's a relation between the red metal and the semis?

Because copper goes into chip stocks, not chip stocks.

Copper goes into chips themselves.

It goes into the architecture.

You know, the backbone.

You need wires to conduct, uh, to conduct electricity.

So copper is a basic building block of chip of chips and also the infrastructure of how information is transmitted.

So, uh, they're kind of, uh, hand in hand here.

I think the secular term the secular trend is that we're gonna see material prices go northwards.

Uh, but what was interesting about this today too.

And here's another side point is that we did see that drop in the socks, but we saw copper take a big hit yesterday are the two related?

I think it's too early to tell, but I'm gonna be paying attention to chips and some of the raw materials and those prices in the future.

All right, Jared Blicker.

Thank you, my friend.

Appreciate it.