Yesterday, the market shifted from cruise control into a freefall in the blink of an eye. The shock reverberated quickly, and many raced to social media, looking for answers and sounding the alarm. Soon, #stockmarketcrash was trending, and that only made things worse.

Mayday! Mayday! Mayday!

I’m not sure about you, but I have been riding planes for almost sixty years and still feel uneasy when they hit air pockets. We know what happens with airplanes, but we are unsure what caused yesterday’s market turbulence.

Red Letter Day

Was it the Grinch or Gremlins?  Whatever hit the market did a great job of spreading pain. It's kind of funny that so many market mavens have been hoping for the same tide to lift all boats simultaneously.

The red across the screen made yesterday’s Heat Map resemble those new weather maps that sensationalize hot weather. Back in the day, there used to be a sun over areas with hot temperatures, but today, it feels like an aerial view of Hades.

Market Breadth

I have to admit there is no way I thought there were 658 advancers on the New York Stock Exchange (NYSE) and 1,326 on the NASDAQ Composite. The best place to see yesterday’s scare is in the direction of volume:

On the NYSE

• 352.2 million up volume
• 3.83 billion down volume

On the NASDAQ

• 1.32 billion up volume
• 4.92 billion down volume

New highs over new lows remained firmly in place, but a couple more sessions like yesterday could see that change.

If that happens, it would be a huge red flag. 

The Cool Index, Blinks

The so-called “Fear Index” and the Volatility Index (VIX) finally scooted higher as the broad market slipped into a freefall.

Climbing more than 9%, the VIX is still extremely depressed and still as cool as the other side of the pillow.

Santa is Still Hanging Around

My man Ryan Detrrict from the Carson Group says we should believe in the Santa Claus Rally (SCR) because it happens so often, and the returns are substantial when it does.

Do You Believe?

And if you don’t believe in Santa Claus, maybe you should keep faith with the “Long Magnificent Seven.” For all the firms and experts that have rallied against the rally and valuation, it's by far the most crowded traded.

I like finding ideas before the crowd, but it's not always disqualifying.

Today’s Session

The canary in the coal mine is telling everyone to be calm as the ten-year yield pierces a key technical level.

The Fed is Afraid – But of What?

This chart (below) has haunted Jay Powell and the Fed since the initial inflation management - stopping short of licking inflation and allowing it to spike again.

This dilemma was at the heart of the standoff between Senator Shelby of Alabama and Jay Powell on March 3, 2022. 

Essentially dissing Powell, Shelby suggested, “I knew Paul Volcker, and you’re no Paul Volcker.”

The puzzle was expressed by Philadelphia Fed President Patrick Harker in a radio interview last night.

Here are some quotes:

• “There is no need to raise interest rates anymore…the inflation outlook is improving.”
• "The job of controlling inflation is not done."
• "Soft landing process will likely be bumpy."

And the confusion is amplified by the data.

Putting a Finger in the Air

The initial jobless claims and continuing claims released this morning are moving sideways.  

The final read on third-quarter GDP came in at +4.9% against consensus of +5.1%

The LEI report should reiterate the threat of recession, and strangely, that might relieve the jitters.

Tweet

 

Home | Products & Services | Education | In The Media | Help | About Us | Disclaimer | Privacy Policy | Terms of Use | All Rights Reserved.