The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Weakness at the open.
Overnight and premarket futures did their usual. S&P futures were slightly bid by the open but regular hours trading brought out the bears. The index opened +10 points and went negative within 15 minutes. Headlines didn’t seem to be the catalyst but precious metals also slid, and the Dollar notably strengthened. Usually, simultaneous movements across markets are the result of a significant news development but that’s not the case today. For some unclear reason, risk-off began at 9:30 AM and it affected many markets. Treasuries didn’t react too much though so it wasn’t a clandestine fear-trade. Capital flow in the US was 109% so that’s not indicative of unusual investor engagement.
Some back and forth price action in US stocks isn’t a worrisome thing, it just hasn’t happened all that much lately. Perhaps we’re entering a digestion window for the market.
I think it is unlikely that the market has lost it’s love for equities. At some dip level, in the absence of material news, the tape will bounce and the trend northward will resume. In the interim, we could be seeing some portfolio adjustments in real time. I don’t think it’s pure coincidence that 3 major trends reversed intraday together. It could be large institutional players making moves.
Long US stocks, long precious metals, and short the Dollar have all be very lucrative trends. Any big hedge fund in the momentum game will be involved. Taking gains and/or trimming exposure across the board seems very reasonable and logical. And if considering their correlations of late, if things turn, it could be devastating to those players.
In the absence of evidence, I think it’s as good a theory as any.
We are left with one session left in the week and expected news is thin. Maybe if the shutdown ends, we’ll get a kick in the markets but that’s a longshot.
It appears we’ll play some technical small-ball tomorrow. Earnings season starts to get going Tuesday so if preseason hype is going to show up, it’ll have to show up soon.
See you tomorrow.
-Mike
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