The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Intraday jitters
The premarket was quiet and capital markets were moving in the risk-on direction. Yields were falling and stock futures were bid. The S&P 500 opened +45 and was nicely higher until the late morning. The tape slid, led downward by tech, and there were no smoking gun headlines to blame. Most other sectors remained positive but tech, and also energy, were significantly sold. Late in the lunch period, President Trump posted that the US would need to retaliate for Iran’s downing of an Apache helicopter last night. This news prompted the usual war-is-worsening reaction in markets. Crude spiked, yields climbed, the Dollar climbed, precious metals fell, and stocks fell. After the initial shock of the President’s post, markets stabilized and calmed, retracing some of the moves which occurred with the President’s post.
So much for a quiet session. US equities are sensitive to US/Iran news today, after essentially ignoring it yesterday. Who knows where this leads us going forward but, unless peace is about to break out, stocks are going to have a tough time going north while investors are so jittery.
Maybe tomorrow’s CPI data (+4.2% est vs +3.8% prior) will help, but it will have to deliver a cool surprise to do so. If the number comes in hot, the bears are going to feast.
Setting aside the potential inflation catalyst coming tomorrow, we should step back a bit and consider where the drop in stocks since the 2nd leaves us.
This selloff is not a small dip. The market has dropped significantly. The chart is not broken but the conversations can be started about whether we are at risk of breaking soon. The index remains above the 3 major moving averages, so technically, most chart-followers should continue to lean bullishly. The bullish trend, in medium to longer time windows, remains intact.
How much conviction do the dip-buyers have still? The chart is not broken but it looks fragile and vulnerable. Is that risk obvious enough to back-off the usual buyers? We have experienced a tremendous extension of the existing bull market since April. A pause and/or a pullback was to be expected. It has arrived and it is here, but it’s been a bit faster and sharper than most bargained for.
I think today’s intraday jitters show us that the market is not ready to bounce fast and resume its run to the stars. Even if inflation data provides an assist to the longs tomorrow, I think time is needed before a significant new upside leg can breakout.
See you tomorrow.
-Mike
Visdom Market Commentary
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