This morning has gifted us what looks like a minor relief rally right now… on much lighter trading volume than we’ve seen over the last few days. There are some reasons both obvious, and not so obvious for some support in this area. Dead cat bounce ?? No, I don’t believe in the term. That’s the came thing as shrugging your shoulders and saying “I don’t know”. There is always a reason. Today’s headline rumor was some kind of coordinated central banking action. Really though, with interest rates pinned to the floor, and the marketplace functioning quite well (extremely volatile, yes…but not broken), their hands are sort of tied.
The other supportive issues bouncing around out there are today’s northerly move for Crude prices, positive movement in British Pound, and the Euro exchange rates (Both now off of their highs), and the end of the quarter later this week. You see, as of last week, bonds had already been out-performing equities, and now with the recent global move out of risk, and into safe-haven assets, that pension fund end of quarter/ end of month mandated re-balancing has been exacerbated to some degree.
All of that said….. this environment will remain tough for the foreseeable future. There are simply so many unknowns. On top of the various nations within the EU that may want to leave the EU, and the different parts of the UK that may want to leave the UK,…. there’s the US election cycle, and the ongoing questions regarding both monetary, and fiscal policies. So, where is everything right now. Let’s fill out the range card.
1) The S&P 500 peaked at 2027, short of my level in that area of 2029, the 200 day SMA did not hold, and the index appears to be searching for support. I believe that there is some down at 2006 that I hope we don’t go near. That would make for a tough Tuesday afternoon.
2) The US Dollar is weaker, but has been strengthening throughout the later part of the morning. WTI Crude was in rally mode, but has gone from approaching $48 to defending $47. Gold is a little soft, but not truly weakening all that much. The VIX continues to sell off hard.
3) Health Care, Energy, Tech, and Discretionary names lead the way. The bounce in the Financial sector is far less robust than one might have hoped. Utilities, obviously would be in the red at this point.
4) Riskier assets turned as the morning progressed, and so has has the Treasury market. The 30 year is now green on the day, and the 10, and 5 year maturities are approaching the unchanged mark.