Yeah, but…

Last Friday I penned a quick note titled “Wow!! But…”, and poured two glasses of cold water on the day’s big rally.

Specifically: 1) the fact that bonds rallied hard as well, and 2) that, for stocks, it occurred on notably below-average volume.

Well, today, after trading higher for better than half the session, the S&P gave up the ghost and closed about 20 points off of its intraday high. While a roughly .7% decline isn’t huge (it’s the equivalent of about 185 Dow points), it’s still nonetheless notable — just not enough to put Wow!! in today’s title.

As for its importance, well, frankly, there wasn’t any. For today’s late-day selloff to be meaningful, in terms of signaling something pernicious in the immediate underlying conditions, you’d need to see bonds rally; as frightened money would’ve flown to safety. Didn’t happen (didn’t happen in safe-haven gold either, by the way).

Here I added today to the chart I showed last time (bonds green, stocks white):

Bonds and stocks now moving together for three days running. 

Today’s explanation? Well, if I hadn’t seen any news I’d say the most likely excuse would be that a voting Fed member must’ve said that the economy’s good and that they can go easy on rate cuts, or maybe a good data point or two was reported (i.e., in both cases, it would mean good news is bad news [and the Fed’s gonna get busy], which is clearly what explained the rally last Thursday and Friday), but we didn’t get either. So who knows? Maybe it was indeed simply meaningless action.

Well, just like last Friday, that’s the message today’s volume action sent. I.e., volume today was, once again, notably below average (suggesting that today was more about reluctant buyers than it was raging sellers):

Stay tuned… much more to come this week — and it’s indeed likely to turn out to be at least near-term meaningful: Fed chair Powell gives a speech tomorrow, and China’s trade negotiators will be in Washington Thursday and Friday… 


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