The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Domestic bearishness
The first half of the day was an exercise in repetition. Overseas markets rallied. Overnight futures picked up a bid in the wee hours. Precious metals rallied. The Dollar was slightly weaker. Yields were essentially unch’d. Earnings reports were all beats. The S&P opened about +20 and climbed a little bit further ahead of lunch. Then Europe closed and things fell apart.
The S&P rolled over around 11:30 AM and went substantially negative an hour later. It spent the rest of the afternoon down about 60 points and capital flow shot up from 105% levels in the morning to 126% in the afternoon. Yields fell across the curve as the risk-off trades moved in tandem, except for the Dollar, that sold off further.
There wasn’t a smoking gun headline to explain the bearish move in US stocks. Some are pointing to loan information coming from regional banks. Whether inspired by a news item or simply a random turn, the bears are now engaged in a slugfest with the bulls. Since Friday, the tape has swung back and forth considerably. We’re experiencing a multi-session consolidation instead of the usual bullish KO, then a multi-day victory parade.
This is behavior from the good old days of trading, pre-pandemic… and pre the everything-rally.
Is this healthy market behavior? Does this suggest the bears will control the tape for a while?
I’m not sure. The unchallenged dominance of the bulls since April has been so persistent that we’ve gotten used to it. We collectively forgot that equities are supposed to chop around much more than they have in the last six months.
From a technical standpoint, last week’s worth of chopping-and-flopping has the index repeatedly testing its 200-day moving average (6557). Hitting that *shouldn’t* be a big deal but it will be. It will ruffle some feathers should it happen.
The initial excitement for earnings season has already disappeared. This is surprising. I wonder if a few more days of quality reports re-inspires the imagination of the bulls and rips the tape northward.
In the meantime, we’re watching traditional market fisticuffs. Don’t catch one on the chin.
See you tomorrow.
-Mike
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