The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Pause or exhaustion?
Premarket futures implied about +20 for the S&P 500. ADP (+44k vs +65k est & +95k prior revised from +98k) data disappointed but didn’t move markets much. The S&P opened about +50 but began to slip around 10:30 AM. By noon, the index was down about 10 points. The index recovered quickly and spent the afternoon slightly positive, then the index dipped a bit into the close. Treasury yields were about unchanged. Crude didn’t move much either. Broadly speaking, across many asset classes, markets did very little today.
News headlines were quiet so perhaps that is the reason behind today’s uninteresting results. Maybe most markets, on the heels of a big, quick move, just wanted a break. Maybe the big, quick move was just the last gasp of a trend doomed to reverse.
Even though the markets are linked, if we focus on stocks, we must ask ourselves if today’s trading alters the price movement since last Wednesday’s close. The S&P closed 7316 then. We are up 5.6% since then, without a down session and essentially without any intraday drawdowns. The bounce is official and in the books. One cannot argue that it didn’t happen or that it wasn’t meaningful.
All good things must end however and so the equity bears are hoping that today signals the end of the bounce. It’s certainly possible. The rally off the bounce was very large and very quick and if one argues that the world isn’t much changed from last week to this, the conclusion follows that the bounce resulted in a significant overshoot… and we just exhausted that momentum today.
There’s a flip side to that coin. Perhaps the fundamental landscape has shifted considerably in a week. Perhaps sentiment overshot and sentiment needed to cool off? Maybe we experience a slow build of positive sentiment from here? This should result in a longer, slower rally, with the usual ups and downs.
I’m doubtful that today was a turning point in stocks. It could be of course but I don’t think so. Who knows what the market does tomorrow but I think the next leg of any kind of trend one could hop on, will kick-off Friday.
Nonfarm payrolls (+80k est vs +57k prior) release Friday at 8:30 AM.
See you tomorrow.
-Mike
Visdom Market Commentary
IMPORTANT INFORMATION
This is general educational information and market commentary and is intended for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction.
All market and economic data herein is as of the date hereof and sourced from Bloomberg unless otherwise stated. The information is subject to change without notice and we have no obligation to update you.
This general market commentary is intended for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The views and opinions expressed constitute the author(s) judgment based on current market conditions, are subject to change without notice, and may differ from those expressed by other employees of Visdom Investment Group LLC ("Visdom") and Visdom. Past performance and any forward-looking statements are not guarantees of future results. It is not possible to invest directly in an index.
We believe the information contained in this material to be reliable and have sought to take reasonable care in its preparation; however, we do not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. Any securities referenced are shown for illustrative purposes only, and are not intended as a recommendation or endorsement by Visdom or by the author(s) in this context. The information presented is not intended to be making value judgments on the preferred outcome of any government decision. This information does not constitute Visdom research, nor should it be considered a recommendation of a particular investment strategy or an offer or solicitation for the purchase or sale of any financial instrument. Investing involves market risk, including the possible loss of principal. You should speak to your financial advisor before making any investment decisions. Visdom and its affiliates do not provide legal, tax or account advice so you should seek professional guidance if you have questions.
