Market Update

 11:35 a.m. ET

*****The members' site is back up with email notification. I'll be posting there after this.

The S&P 500 continues to trade near its flat line in a mixed session. The benchmark index will have another shot at closing at a record high, as it trades a few points below that level (3386.15). The beat in Initial Claims hasn't led to any positive market reaction, evidenced in the weak tone in the cyclicals, and little movement in bond yields.

The mega-caps are driving gains in NASDAQ (+0.7%), particularly Apple. - Technology (+0.7%), Consumer Discretionary (+0.55%) and Communications (+1.1%).

On the other side - Energy (-1.2%), Financials (-0.9%) and Banks (-1.8%) are notably weak. Small Caps are nearly flat with the S&P and Dow -0.2%.

S&P is less than a tenth of a percent from the February level it has been struggling to meet. It's hard to believe the mega-caps weight isn't getting the job done here.

SP-500 (1m) and an equal weight index of the FANGs

Otherwise, market participation is poor.

NASDAQ 100 (2m) led by the mega-caps, but the advance/decline line shows little participation elsewhere. The divergence here is similar to that of HY Credit.

It will be interesting to see if the NASDAQ fades again with a pick up in selling at the top of this zone?

NASDAQ 100 (30m) the proposed distribution zone since NASDAQ's Key Reversal Day.

PLUG's (+10.4%) price made a comeback

PLUG (15m) so naturally I wish I had held, but I couldn't take the risk of giving back all gains on a measured move to fill the gap.

For now the S&P is struggling with the longest yard, or inch.

Early Update

 10:18 a.m. ET

The averages open mixed with NASDAQ 100 (+0.4%) and Small Caps (+0.45%)  best, and Dow (-0.15%) the laggard. The mega-cap tech stocks are green, most up around 1%. Small Caps are coming alive on the upside with the re-opening trade (airlines, cruise lines, etc) are starting to perk up after the initial claims report.

S&P-500 is unchanged (0%) hovering below the February closing high.

SP-500 (2m) 

The majority of S&P sectors are little changed like the S&P. The early leaders are mega-cap heavy Consumer Discretionary (+0.3%) and Communications (+0.8%.). Technology was an early leader, it gave up early gains to unchanged.

The laggards are  Energy (-0.3%), Financials (-0.3%) Banks (-0.8%) and Health Care (-0.5%).

Volatility was on the weak side (VIX -1%), but is coming up as Tech comes down.

The U.S. Dollar (-0.5%) continues to slide lower following the better than expected Initial Claims report, which is helpful for stocks and commodities.  Yields a between 0 and +1.5 bp in modest curve steepening.

Credit is green, well actually it's mixed, but it's not worse. It's also not better.

SP-500 (1m) and HYG

The rotation to value/cyclicals is not a factor and it seems like the S&P's February closing high is the focus as a major psychological magnet. Credit remains one of the biggest near term eyesores for the broader market.

A.M. Update

 Index futures start mixed. Most have been edging slightly lower, NASDAQ futures have been edging higher in follow-through from yesterday's NASDAQ led gains.

The latest weekly initial jobless claims fell below 1 million for the first time in 21 weeks. Claims totaled 963,000 (consensus 1.150 million). Today's tally was below the prior week's revised count of 1.191 million (from 1.186 million). Continuing claims decreased to 15.486 million from a revised count of 16.090 million (from 16.107 million).

Asia closed mixed, while Europe trades lower.

China's aviation regulators announced that passenger traffic in July was down 34.1% yr/yr after being down 42.4% in June. Australia reported better than expected employment figures for July, but the report does not reflect the impact of aggressive lockdown measures taken at the end of the month.

• China's July FDI 0.5% (last -1.3%)
• Japan's July PPI 0.6% m/m (expected 0.3%; last 0.6%); -0.9% yr/yr (expected -1.1%; last -1.6%)
• Australia's July Employment Change 114,700 (expected 40,000; last 210,800) and Full Employment Change 43,500 (last -38,100). July Unemployment Rate 7.5% (expected 7.8%; last 7.4%) and July Participation Rate 64.7% (expected 64.4%; last 64.0%). August MI Inflation Expectations 3.3% (last 3.2%)
• New Zealand's July FPI 1.2% m/m (last 0.5%)

European officials welcomed the U.S. decision to hold off on imposing additional tariffs over subsidies to Airbus. The two sides will begin a new resolution process. Wirecard will be replaced by Delivery Hero in the DAX. Italy sold 3-, 7-, and 30-yr debt.

• Germany's July CPI -0.5% m/m, as expected (last 0.6%); -0.1% yr/yr, as expected (last 0.9%)
• France's Q2 Unemployment Rate 7.1% (expected 8.3%; last 7.8%)
• Spain's July CPI -0.9% m/m, as expected (last 0.5%); -0.6% yr/yr, as expected (last -0.3%)

S&P futures got a little upward boost from Initial Jobless Claims coming in better than expected, and trade just fractionally above the flat line. NASDAQ 100 futures display relative strength up +0.55%.

U.S. Treasuries trade near their flat lines. The 2-yr yield is flat at 0.16%, and the 10-yr yield is flat at 0.68%.

The U.S. Dollar Index is down -0.4% to 93.07, dipping more on initial claims.

WTI crude futures are flat at $42.67/bbl.

Gold futures are -0.4% to 1940.0/oz., but silver futures are up +1.8% to $26.46. Conversely, Copper futures a down -1.5%- the copper:gold ratio is falling toward the reality of yields.

I'll be watching how HY credit trades today after two ugly days back-to-back.

Daily Wrap

 Index futures made an unusual push higher in the wee hours of the morning. S&P built on that in the cash session to come within a few points of its February record high, but couldn't quite seal the deal this afternoon.

SP-500 (2m) briefly above February's closing high.

What was more unusual than the overnight ramp was what happened at the very start of the cash session. Before the open Small Caps and Dow had a slight edge as they've had the last 3 days, not so much as to stand out as notable strength. As soon as the cash market opened, things changed fast.

Small Cap Russell 2000 futures (1m) ramp in the overnight session, and decline from the cash open

NASDAQ 100 futures (1m) ramp in the overnight session and rally from the cash open

Dow futures (1m) ramped overnight, but were more or less flat on the day from the open.

The dynamic between NASDAQ and Small Caps today is the exact opposite of what we've seen the last 3 days as rotation from growth and momentum to value, lifted small caps and sunk NASDAQ.

Small Caps and NASDAQ 100 (1 min intraday) the exact opposite of the last 3 days.

It's not unusual to see relative performance differences between sectors, style factors and the averages, but generally the averages trade in the same direction. The last 3 days, and today's complete reversal of the trend, is highly unusual. You can see just how unusual on the chart below.

Small Caps and NASDAQ 100 (5m) trend mostly together, except the last week.

As for the rotation of the last 3 days into economically sensitive cyclical sectors and value style factors, it hit a brick wall today. The growth factor retraced all of the last 3 day's losses, an momentum retraced about 80% of the last 3 days loss/rotation. It has virtually vanished. 

After leading yesterday's declines, the mega-caps Tech stocks were the top performer today, almost as if the invisible hand that moves markets saw that small caps were not moving the S&P enough to take out the Feb. high, so Apple (+3.3%) and Microsoft (+2.86%) were called up to finish the job. As mentioned last night, Apple's market cap is about the same as 90% of the Russell 2000 combined. 

Yesterday's best performing sector, Financials led by banks, were today's worst performing and the only sector to close lower.

Moderna (MRNA +0.8%) reached a $1.525 billion dollar deal with the U.S. government to manufacture and deliver 100 million doses of its vaccine candidate. The stock gained as much as 11% and then lost most of it to close less than 1% higher.

MRNA (5m)

The day's whacky award goes to Tesla(TSLA). The stock rallied 13% simpy because of an announced 5:1 stock split. A split does nothing to the value!

In news, Treasury Secretary Steve Mnuchin reportedly offered to resume COVID relief negotiations, but Democratic congressional leadership said that administration officials refused to budge from their prior stance. This didn't help gold.

Averages

After 3 days down, NASDAQ is the leader and small caps the laggard.

 S&P 500 ⇧ 1.4%

NASDAQ ⇧ 2.59%

DOW JONES ⇧ 1.05%

RUSSELL 2000 ⇧ 0.41%

NASDAQ 100 (30m) - you can see the broadening formation I mentioned yesterday (higher highs/lower lows). I still think there's a pretty decent chance this has been a large distribution zone. You have to consider the size of institutional positions in the most popular stocks (mega-cap tech), they're way too big to turn on a dime.

S&P sectors

Technology was the clear and singular leader to the upside, lifted by the mega-caps ralling together, which has been rare recently. Financials went in the opposite direction with the banks lower (-0.6%) despite higher yields. Yesterday the defensive bond proxy sectors and defensively oriented Health Care were also very weak, today they were strong. Many of the stocks in these sectors fall into the momentum style factor like the Tech sector and the style factor retraced most of the last 3 days of rotation today.

Materials ⇧ 0.59%

Energy ⇧ 0.99%

Financials ⇩ -0.28%

Industrial ⇧ 0.32%

Technology ⇧ 2.27%

Consumer Staples ⇧ 1.29%

Utilities ⇧ 1.45%

Health Care ⇧ 1.68%

Consumer Discretionary ⇧ 1.33%

Real Estate ⇧ 1.26%

Communications ⇧ 1.19%

Basically everything that was weak yesterday was stronger today and areas that were very strong yesterday (i.e.- Banks) were weak today, right down to the most shorted index of stocks that has been performing better than any of the averages. They traded much more like Small Caps (weaker). 

Internals

Considering the S&P and NASDAQ gains, market breadth and volume was uninspiring. NYSE Advancers (1844) edged out Decliners (1084), but not by much considering and on much lower volume of 770.9 mln shares. NASDAQ advancers (1825) weren't much more than Decliners (1426) considering NASDAQ's advance.

The price/volume relationship was extremely dominant at Close Up/Volume Down, the weakest p/v relationship. Internals today are very close to a 1-day overbought condition, except the ratio of advancers to decliners is too weak.

Market breadth had been better with small caps' stronger recent performance, it deteriorated noticeably today.

NASDAQ 100 (1m) and NASDAQ Comp. Advance/Decline line

SP-500 (1m) and NYSE's Advance/Decline line.

Volatility

VIX (-8%) gave back most of yesterday's outsized gain, but considering the S&P retraced all of yesterday's loss and added +1.4%, VIX shows a little relative strength. It's Russell 2000's volatility index that stands out with unusual relative strength.

Notice it started displaying relative strength 2 days before yesterday's loss. The same thing happened last week with NASDAQ's volatility just before it traded lower.

NDX volatility displayed relative strength 1 day before the 3-day decline.

VVIX's relative strength is jumping off the chart.

VVIX vs. SP-500 (5m) relative strength points to pros hedging risk.

As mentioned in the Afternoon Update, VIX futures built a positive 3C divergence throughout the cash session.

Treasuries

 Treasury yields were up for a 4th day, but in a narrow and choppy range, finishing little changed. The 2-year yield was unchanged at 0.16%, and the 10-year yield increased one basis point to 0.67%. 

10-year yield (daily) ended with a star candle (loss of momentum) near the 50-day moving average.

Currencies and Commodities

The U.S. Dollar Index decreased -0.2% to 93.44 which allowed commodities and precious metals to recoup some of yesterday's losses.

WTI crude gained +2.3% to $42.60/bbl.

Gold futures  gained a modest +0.1% to $1,949.00/oz a day after losing more than 4% on rising real yields. As covered last night, gold's price action has not stabilized yet.

GLD (15m) after COMEX gold closed, futures and GLD sold off into the close. 

Gold miners (+0.5%) displayed a little better relative performance, but I'll be looking for prices to stabilize in both miners and gold. If yields lose upside momentum as they seem to be today, it could help gold stabilize being gold is tracking real yields inversely.

Bitcoin bounced and GBTC gained +4.4%. I still like the prie action here, BTC is just at a key level it needs to work through ($12k).

Summary

Whatever the rotation from momentum/growth (mega-caps/Technology/NASDAQ) to value (cyclical sectors/small caps) was about, it was almost completely unwound today. As demonstrated by the divergent price trend between Small Caps and NASDAQ over the last 4 days, it's highly unusual. From the second week of May to the first week of June there was an even stronger rotation to value with much better confirmation from other asset classes (bonds, commodities, currencies), and there was nothing like this divergent price trend.

I got the feeling from the overnight ramp and the leadership of mega-caps (while very little else participated meaningfully as exhibited by weak breadth) that is was almost like the invisible hand that moves markets made a phone call and said, "Get the S&P above the February highs". Driving Apple and the other mega-caps higher is a much more effective way to accomplish that goal. That's just a feeling.

Something else stood out today. I mentioned it in the first cash session post and the last - High yield credit. Yesterday credit sniffed out something it didn't like and not long after stocks were selling off across the board. Credit was not enthusiastic about the S&P and NASDAQ's advance today, but toward the close it got outright ugly again like Tuesday afternoon.

SP-500 (1m) and HYG (high yield credit). HYG is not the only credit asset not playing along. I don't know what caused the weakness in credit yesterday that preceded the decline in stocks. I mentioned that  HY credit does not like higher yields as a possible influence, but yields weren't moving much today. Look at the sell-off in credit into the close as the S&P was just a few points from the February closing high. It happened fast, but after flashing weakness all day. That's uglier than yesterday.

In last night's Daily Wrap one of the issues I mentioned was technical levels as an influence (I used Energy as an example). The S&P is two-tenths of a percent from the February high. That's a psychological magnet. I'm surprised it wasn't hit at the close. I expect it will happen. If credit still looks like this (or worse), I'll be entering a new short trade.

*I closed out the PLUG long this afternoon. My trailing stop to protect profits waas $10.25. Yesterday I sold enough to take all risk off the table and let profits run and I moved it the stop up to $11. Price gapped down below $11 today. I gave it the rest of the day to see how price acted and while it came up +5% off the morning low, the price action suggests a high probability of more near term downside. I think filling the gap down to the $9.25 area is probable. If it does, I'll take a look at it on the long side again. It will also depend on the tone of the broader market. I don't want to have a lot of long market exposure with credit taking the ugly turn it is taking.

Overnight

 S&P futures are near unchanged (-0.05%). Russell 2000 futures ended the day with weak, ugly price action similar to yesterday. 

WTI crude is near unchanged (-0.15%). Gold futures are down -1.1% , that's the late day selling after the COMEX close.

Treasury futures are flat and currency futures have flat price trends. I think someone put in a lot of effort last night to get the S&P close to the February highs so I suspect it hovers in the area overnight.

I'll be looking at credit in the morning. 

Hopefully the website issue will be resolved. Last I heard was they have a ticket in to work on it, but apparently this effected a lot of people due to the roll-out of a new version of the software. When the regular site is back up you will get updates in your email and you'll know that it's back up. My apologies for the inconvenience. 

Afternoon Update

It's another strange day from the overnight session's erasure of yesterday's losses, but got even stranger as of the cash open. S&P tagging its February high is not so strange being it was less than a half percent away. NASDAQ and Small Caps are nearly opposite again, except today NASDAQ is the best performing trading at session highs, Small Caps the worst performing, near session lows- the exact opposite of the last 3 days

NASDAQ 100 (1m) leading Small Caps- .It's not unusual to see differences in relative performance, but the averages generally trend together in the same direction. This behaviour the past 4 days is very strange. At least in today's case, I don't think the S&P was able to tag its Feb. high without the mega-caps. Apple's weight is equal to that of 90% of the Russell 2000. While S&P traded higher as small caps were in favor the past few day, it's exposure to the mega-cap weakness had weighed it down.

Technology is the standout on the upside, but the defensive sectors a also solid (all of which were the weakest yesterday. Likewise, Financials and Banks that were very strong yesterday, are the weakest today. The re-opening trades that were strong yesterday, are notably weak today.

Credit hasn't gotten any worse since the last update, but it is lagging behind.

SP-500 (5m) and HYG

There's slight relative performance difference in volatility. Russell 2000's gauge is slightly weaker since the afternoon., NASDAQ's is slightly stronger suggesting perhaps we see another flip-flop of sector/style factors. 

NASDAQ 100 (1m) and its volatility gauge (white) displaying relative strength. 

VVIX, however, has been notably strong for a week. 

SP-500 (5m) and VVIX relative strength building for a week, about the same time we saw the ABI plunge to the 17 zone las week.

While precious metals bounced a bit, my view is the same as last night. I don't think they've settled yet.

GLD (15m) 

I'm closing the rest of the PLUG long.

PLUG (15m) I don't like today's price action, it loos like it could go all the way down to fill the gap. If so, I'll take another look at it then.

While I expect the S&P will fight tooth and nail to hold the record closing high designation, volatility futures' 3C char has been strengthening throughout the day. On any other day I'd be weary of weak market closing action.

VIX futures (1m)

I'm going to get this post out. If anything changes before the close I'll have an update. I expect the Daily Wrap will be here tonight, but I am getting back on the phone with support after the close.

*Actually the market is getting ugly the last few minutes. 

Intraday Update -Credit Acting Up

 As the S&P (+1.3%) tests yesterday's highs, high yield credit is getting ugly again.

SP-500 (2m) and HYG (high yield credit)

Small Caps are at session lows (+0.1%) and Treasury yields, which were hunky-dory earlier, are sliding lower. Also market breadth is notably weaker today than it has been the last 3 days.

The credit signal is not as intense as yesterday afternoon, but it started from a weak place today, and yesterday it happened pretty fast. Volatility has firmed up a little, again not as clearly divergent as yesterday.  In short, the market is getting a bit jittery

Market Update

12:40 p.m. ET

SP-500 +1.45%, Dow +0.9%, NASDAQ 100 +2.6%, Small Caps +0.4%.

The S&P retraced yesterday's decline as if nothing happened. The rotation theme out of momentum/NASDAQ into cyclicals/Small Caps has completely reversed. As such, NASDAQ is the best performing major average, Small Caps are the worst.

SP-500 (5m)

NASDAQ 100 (5m)

It's the same theme for S&P sectors, yesterday's worst are today's best -Technology +2.35%, Communications +1.4% -the mega-cap FAAMG stocks are firing on all cylinders together- and the defensive sectors that were weak yesterday.

The worst performing are Financials -0.2%/Banks -1% and the cyclical sectors are generally lagging. In short there's no sign of the last 3 days of rotation, almost as if someone pushed a reset button. Even the most shorted stocks that have been squeezing, are underperforming today.

VIX (-9%) retraced nearly all of yesterday's massive bullish engulfing candle, as if nothing happened, and the other volatility indices have cme down more than usual. VVIX is still elevated suggesting some hedging activity. 

Yields are higher from 0 to 3 bp in curve steepening trade, again as if it was a nice quiet, textbook bullish day and nothing happened in the final hour of trade yesterday.

Crude is up +1.4% and hovering right at the trend line from late June. Gold and silver have bounced a little, but it's little more than a consolidation of yesterday's massive decline.

The one area with some vestiges of yesterday's afternoon trouble is high yield credit.

SP-500 (1m) and HYG. While HYG has bounced, it's nowhere near confirming the retracement in the S&P.

Otherwise it almost looks as if a clean-up crew came in overnight and wiped clean the afternoon selling, and the last 3 days of rotational bias. It's quite odd.

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