The Fuse
Some weakness today spilling over from yesterday’s sharp move lower. On Thursday, the SPX 500 lost about 1.5% on higher turnover, notching a distribution day. We haven’t seen many of those so far in 2023, but in a bear market we have always seen some of the most spectacular rallies happen. Some decent earnings overnight and into those morning but rates are still on the move. We have a three day weekend upon us, hence volatility is likely to be sold down before the end of the day. It often means a rally is going to ensue, but the markets have other ideas.
Volume has started to expand recently, which may be a sign of more selling to come. How is that happening? Well, we have seen markets rising sharply in the face of a hawkish Fed and liquidity drains, can that continue? it’s hard to see it. The SPX 500 broke 4100 on the close yesterday and may soon see a test of 4000, then below there is 3977, which is the 50ma. Remember, it’s still a bear market, use the bear market playbook which is lots of cash, adding puts, taking profits quick and keeping positions small.
Monday the markets are closed in observance of President’s Day. Enjoy the day off!
The Internals
Plenty of up/down action yesterday with a huge selloff on that PPI miss, but as we see. from the VOLD (top left) the sellers were not all that serious. As has been the pattern of late, dip buyers came in and nearly took the markets back to fill the gap. Notice the concentrated selling that hit during the final ninety minutes, the VOLD went straight down, the ADSPD (bottom, second from the left) ended as a trend day down. Put/calls are on the rise. Internals were bad to start and finished worse, something different than recent patterns.
The Dynamite
Economic Data:
Friday: import/export prices
Earnings this week:
Friday: DE, AN, AMC