Finally, there was some relief. Too bad it might have only lasted one day.
It was a good session on Thursday. However, the rally fizzled into the close as investors, or probably more to the point, traders, started to cash out of a big percentage of trades ahead of the large slate of earnings after the bell.
Market breadth got much better yesterday, except for one measure that reminds us of the carnage and the vulnerability.
NYSE
- 2178 winners - 829 losers
- 3.3 billion up volume - 829 million down volume
NASDAQ
- 2172 winners - 894 losers
- 2.1 billion up volume - 640 million down volume
Milestones
NYSE
- 11 new highs - 305 new lows
NASDAQ
- 23 new highs
- 284 new lows
The Fear Index
Although this has been a difficult month, the so-called “fear index” hasn’t spiked anywhere near early-year levels.
Inflation & Runaway Fed
The first spike of fear happened in February with the 10-year yields rapid approach toward 3%, which somehow became the sword of Damocles ready to strike a deathblow. It was a combination of the yield moving higher, and speculation that Chairman Powell & Co would overreact. That never happened, and the yield eventually moved higher in the ensuing months and didn’t rattle the market.
Trade War & Peak Earnings
The second spike was another one-two combination. The trade war became official, and the term “watershed moment” got everyone thinking the party was over. It turns out those first quarter results being rolled were not peak earnings.
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Runaway Fed & Peak Earnings
The current spike in the CBOE Volatility Index (VIX) is Fed-driven once again. For whatever reason, members of the Fed have felt the need to walk and talk with more swagger. Powell may not be loco, but his words have driven the market crazy.
Now, with hits to Amazon (AMZN) and Alphabet (GOOGL), it will be interesting to see how much fear is displayed via the VIX. Honestly, there is no way anyone could believe either one of these companies has reached “peak earnings,” but they must go through the comeuppance with missing the Street and offering a lower current quarter guidance.
Hang on to your hat boys and girls.
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