Only large-cap growth rallied yesterday, and now, it's becoming absurd.

Moreover, market breadth was significantly worse than the -0.32% decline in the S&P 500 suggests. What’s more, the most telling deterioration is happening on the New York Stock Exchange (NYSE).

Tough Sledding

Only two sectors finished the session in the plus column. I’m very disturbed by the action in Real Estate (XLRE).

And I’m even more concerned with the selling of regional bank stocks. I don’t think there is contagion to big banks. In fact, the Fed could use a crisis there to pump more money into the economy.

SLOOS

The Federal Reserve Senior Loan Officer Opinion Survey (SLOOS) on bank lending continues to see banks tighten somewhat and considerably on commercial real estate loans in all categories, including construction, nonresidential, and multifamily.

The real risk comes with the wave of refinances scheduled around the corner.

Momentum Darlings

Only the momentum darlings are getting love, and it's borderline cult-like.

Moving to Technical and Behavioral

From our three-pillar system, fundamentals are playing a very limited role, as groupthink and panic buying, coupled with moves through key chart levels, have created a limited feeding frenzy. This will bring key support points into play on the downside.

Today’s Session

The market is opening higher, but the buying continues to become even more narrow.  Momentum names have gone off the rails and are skewing the overall market more than ever.

According to sentiment trader:

• The S&P 500 is within .35% of a 3-year high.
• Fewer than 40% of its stocks are above their 10-day avg.
• Fewer than 60% are above their 50-day.
• Fewer than 70% are above their 200-day.

Since 1928, that's only happened once before: August 8, 1929.

Meanwhile, the spike in the ten-year treasury raises a yellow flag.  In addition, inflation expectations are also moving higher.

This morning, Deutsche Bank moved into the ‘no recession’ camp, leaving a handful of firms, when it was once unanimous.

The problem with all these firms becoming so optimistic is they are also looking for a tidal wave of rate cuts (although DB lowered their count).

I don’t think they can have both.

Comments

I’m only about 3 months in but even though I feel like I am in a maze at times Ireally enjoy and appreciate your perspective of digging for nuggets of informational value for our group to use . Stuart strash on 2/7/2024 8:06:16 AM

Thanks Stuart, The market and economy have been a maze.  In some respects a deliberate labyrinth of confusion and in others a guessing game because of the unprecedented amount of cash that cascaded on the nation.Another serious issue is a market that has moved away from fundamental news and developments being primary short term triggers to events and news (often based on poorly applied surveys). We work through them and try to remain disciplined (I remember how everyone lost discipline in the late 1990s and I'm aware of these stories that even include Sir Iascc Newton). We appreciate your feedback as well.  CP Charles Payne on 2/7/2024 8:59:32 AM

Tweet

 

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