Joe Mazzola, director of trading and education with Charles Schwab, joined Cheddar News to discuss Wednesday's trading session as markets closed mixed.

<div class="block">Joe Mazzola, director of trading and education with Charles Schwab, joined Cheddar News to discuss Wednesday&#39;s trading session as markets closed mixed.</div>

Closing Bell

Charles Schwab Director Talks State of Economy After Mixed Stock Close

Joining me now is Joe Mazzola, Director of Trading and Education at Charles Schwab, Joe, thanks for joining. Thanks for having me. How are you doing? Good things. So let's talk about obviously our investors and our viewers see on the screen here, how we fare today? Mixed market, what should viewers take away? Well, what I think they should take away is what the market said coming into today. And basically you had five stocks that made up 25% of the market cap of the S and P 500 that can't last forever, right? The other thing that we saw was that of the S and P 500. Only about 20% of the names were trading or performing above the market itself. Once again, you know, very, very kind of short term and not dispersion that you want to see in a healthy market. So I think what we're seeing today and what we're really starting to see below the surface is you're really starting to see investors kind of switch move into maybe some of the value names move into some of the cyclicals. Now, three days, right, three days of that trading does that make a trend we'll have to see. But what I found really interesting today was the internals, you had both the advanced declines of the S and P 500 the NASDAQ show positive momentum while you actually saw a lot of the five major mega caps actually down on the day. So a lot of that rotation is occurring below the surface. We'll have to see how long that trend continues. I think it's, you know, rightfully so confusing for some viewers and investors out there right now because we know the saying you don't fight momentum and we momentum certainly pick up in the stock market and some of these underperforming tech names last year doing quite well this year, especially in A I. But the other concern is that rates could still rise. Inflation isn't yet at 2%. It needs to stay there for a while for the fed to feel comfortable and we still do hear cause of a potential recession. So how should investors make sense of that as they figure out their strategy? Well, investors got a little bit of a curveball today, right, with the Bank of Canada raising rates and we saw that the same thing with the Bank of Australia, kind of pushed up the expectations for rates here in the US. You looked at the probability of a rate hike move from 80% chance of nothing happening at all. The June meeting to about 65% chance today. So that's already starting to move, took a little bit of a hit on tech because of that move. But I think, you know, what investors need to look at is the probability of a recession going forward. As you mentioned, we would kind of look at that as maybe late 2023 maybe into 2024 sonari. But you know, there's a lot of investors, especially some of that participated in our investor survey that we look at on a monthly basis that actually believe that we're part of a rolling recession occurring right now in the United States. To be honest with you, that rolling recession is not that bad of an idea because if you look at what we saw last year and what we saw in real estate and then kind of what we saw in the manufacturing sector, which is happening right now, if it is rolling and if it continues to roll and go from sector to sector, that might actually be a better backdrop for stocks as opposed to all hitting all at one. Right. Right. Because we know typically in recessions, the stock market can fall anywhere between 20 to 30%. So I think some people would wonder, well, then would, in that case, would we retest and perhaps fall below that October low, given that it might be more of a rolling basis. What do you think about that? Well, so there's a couple of technical levels that I'm paying attention to right now, the one we kind of hit today was that, you know, the extension in making our way out of that bear market, which would have been about what, 42 93 42 94 change that to me is more of a psychological level. The area I would really be paying attention to for the next potential resistance would be about 43 25. And that represents two kind of data points. Number one, that's the August 22 high. But at the same time, if you're more of a technical trader, that's an area of resistance called the 61% Fibonacci level. That's an area where you might start to see some traders start to kind of reduce some of that exposure at that point. If we don't get to that, if we start to pull back a little bit, I look at 4150 in the S and P 500 as some potential support. Once again, back to the Fibonacci that takes you to that 50% level where you might see some traders start to step back in. So it might be a buying opportunity is what I'm hearing. Well, there's the potential, right? There's the potential that if you start to see that bounce off that level, that some traders might kind of get back into the market, you know that 41 50 we shredded water there for a while before we really started to make that move from that level. So it's not a wide range. We're not talking about a big move. But one thing I think that would be healthy for the market overall is to start to see some of the rotation out of the big names. You know, there's really two things that could occur. You can get a catch up from the rest of the market, which I think something that we're starting to see a little bit where some of the cyclicals that had been underperforming, start to move up in relation to what we're seeing with some of the some of those big five names or a catch down. And in that catch down scenario, if you see those names, you know, start to fall precipitously. Now, remember they represent 25% of the and P 500 market cap that could have a more adverse effect. So I think for investors, what they're really going to hope is that catch up scenario continues. What else did your investor survey reveal? Well, so some of the things that they talked about was this idea of what they sold versus what they bought in the last couple of months, some of the big sellers. And this might take you by surprise, you know, they sold NVIDIA, they sold, they sold Microsoft, they sold Draftkings, they sold Uber, they sold some of the names that really performed well in April and May taking some risk off the table. And what did they do on the back end? They looked to buy some of the under performing names. They had bought Bank of America, they purchased Disney, they purchased Ford, they purchased Tesla, some of the names that had performed as well. And what that tells me is that our investors in our trade, our trader audience, they're looking for some opportunities, maybe buy the dips and some of those names that had underperformed in that first quarter. Right. That's how you make money, right. That's how you can make profits, that's for sure. And take those profits to Joe Mazzola, Director of Trading and Education at Charles Schwab. Thank you. Thank you.