Rally Dreams, Millions of Jobs on Thin Ice, Canada Keeps It Together
Can the rally realistically continue another day? Also, when taken together, these 4 charts show a shaky situation for tens of millions of workers.
Tweet of the Day
Position: None
Kill the Machines Before They Kill Our Markets
* Monday was another day of divergences — with interest rates moving higher and foul market breadth.
* Meanwhile, momentum-based products and strategies (that know everything about price and nothing about value) followed the strong intraday price momentum and ignored the aforementioned divergences.
The S&P Short Range Oscillator moved further into oversold territory at -0.66% vs. -0.08%.
As I mentioned in yesterday’s “Regrets” column, I missed an opportunity to short the gap higher yesterday because of machine/algo-derived market uncertainty and volatility.
Let me explain…
‘Buyers Live Higher, Sellers Live Lower‘
Today’s market structure, as I have previously noted, has produced an unpredictable short-term pattern of equity prices. The ever-growing treasure chests of index funds control stock floats and the pods and other momentum-based quant funds have become the marginal buyer/seller (in which unemotional machines and algorithms dominate much of the trading activity of passive strategies and structures).Â
Yesterday the “buyers lived higher” — serving to exaggerate the day’s advance. The problem I have and others have is that one simply doesn’t easily know when the buying will be sated and how high the machines will take stocks higher. Â
On Monday, with S&P futures more than +65 handles, the buying just stopped (without a catalyst) and the S&P fell by about -30 handles into a large ($8 billion) market on close imbalance. This morning S&P futures are -5 handles (-0.05%). (The Nasdaq, in percentage terms, is down more -0.40%.)
Importantly Monday’s advance was featured by the conspicuous divergences of higher interest rates and poor breadth — two signposts that usually lead me to short the indices:Â
*Â Another rise in interest rates ($TLT ended at the day’s lows).
* Market breadth was foul:
“Kill the machines before they kill our markets.”
Position: None
Are You Ready for a Stock Picker’s Market?
Seventy percent of active managers are trailing their benchmarks, and the pressure to catch up could trigger a focus on stock picking.
Remember When Rising Margin Debt Concerned Fundstrat’s Tom Lee?
Much like politicians, the narratives from the “Permas” always change …. to fit the view.
Position: None
Monday’s Stock Market Rally Was Pathetic. Here’s Why.
Investors are complacent. Even in stocks that are sinking. Until something changes, we won’t get a lasting and meaningful rally.
Tech Bounces Back but Rising Yields Pressure Non-Tech
The megacap growth sectors went from worst (Friday) to first (Monday) as chipmakers snapped an eight-session losing streak, but rising Treasury yields left seven sectors, the Dow Jones Industrial Average, and the equal-weight S&P 500 lower.
Don’t Expect Much of an Oversold Rally With Sentiment So Complacent
The best rallies set up from a place of fear. So, although stocks may be nearing oversold, until investors are fearful, we can’t expect much from a bounce.
Monday’s After-Hours Gainers and Decliners
Position: None