Asian stocks traded mostly lower overnight, with only 6 of the 10 indices we track in the green. European equities, on the other hand (save for Greece and Hungary) are rallying this morning. The major U.S. averages are trading nicely higher as well; Dow up 200 points, S&P 500 up .72%, Nasdaq up 1.23%, Russell 2000 up .95%.
The VIX (SP500 volatility) is, interestingly, up this morning; 1% to 24.7. VXN (Nasdaq) vol is up huge; 7.3% to 29.98.. Clearly, options traders aren’t experiencing that sanguine feel presently reflected in the price action.
Oil’s up 2%, gold’s down $4, silver’s flat, copper’s up 2% and the ag complex is mostly green this morning.
The 10-treasury yield is higher (price lower) and the dollar’s catching a nice bid, up .4%.
Our core portfolio is up .41% so far this morning. The historically-weak market breadth continues to reflect itself within our diversified core mix; expressed this morning by declines in materials, Verizon, energy, staples, and utilities. At the other extreme our tech, Eurozone, base metals, Asia-Pacific and healthcare positions are all up nicely at the moment…
Speaking of weak breadth, last Friday was truly something to behold, particularly in the Nasdaq.
Here’s TD’s Michael McKerr putting it into historical context:
“12 instances between 1999-2003 where NASDAQ rallied 1%+ with declining issues above 50% but less than 60%. One in ‘07, one in ‘08, and one in April ’20. Never ‘this’ egregious though.”
“Yesterday’s 1.49% rally in the Nasdaq came alongside atrocious breadth of 64.5% issues declining. In at least 30 years worth of data, it has NEVER done this…”
I’ve pointed out numerously herein over the past few months how so much that characterizes present market internals is only consistent with the action in bubbles and bear markets past, hence the past periods referenced in McKerr’s first comment above.
Bottom line folks, while the price action is clearly sucking in the unsuspecting — and of course it could turn out okay for them — market internals, and not to mention, global macro conditions have us suspecting, and, therefore, hedging the risk right here…
Speaking of “the unsuspecting”, here’s a little something I chatted to the team over the weekend:
“These 2 tweets speak to the reality of “trading”… I (as do you) distinguish it, by the way, from what we do for clients “long-term investing”… But it’s clearly “trading” that’s moving the market these days. As we’ve discussed, there’s a new gang in town who believes it’s easy-peasy… Well, it’s not, never has been, never will be. I am 100% certain they will learn this lesson, and — I say this with zero satisfaction (I wish nobody ill) — painfully!
I know, I said “100%”, nevertheless, I do recognize that it could indeed be “different this time” — and we’ll continue to manage portfolios accordingly as things develop. One thing is absolutely 100%, however, and that’s simply that there is huge risk in today’s equity markets that a price-moving cohort clearly doesn’t yet appreciate…
Have a great day!