Bottom line: Have things Changed?  Despite the bounce this morning, not really. That said, I think it is still right to favor Technology as the best sector and to avoid any strong directional bets near-term on either Crude Oil (NYSEARCA:USO) or Gold (NYSEARCA:GLD).
Into mid-day, equities have bounced to the tune of 1% as the S&P 500 (INDEXSP:.INX) has rallied back up to yesterday’s highs. While this is mildly encouraging, most momentum remains negatively sloped and we’ll need to see more progress before thinking the worst is over. Especially in light of the Federal Reserve meeting next week.
Despite the weaker economic data this am (with Retail sales falling short), Treasury yields have spiked on the long end. And the yield curve continues to steepen. This can’t be attributed to much else outside of investors selling duration ahead of next week’s Fed meeting. The chance of a hike has now plummeted to 18% based on Fed fund futures. And if volatility continues into next week, which I feel is likely, yields could give back most of these gains that they’ve experienced in the past few weeks.
While much is being made of Crude Oil’s comeback, both Crude oil and Gold have been largely range-bound in recent weeks and nothing seems to have altered that today.
The S&P 500 did in fact breakout above a minor downtrend this morning which has held over the last couple days as shown in the hourly chart below. However, it will still need to get back above 2163 to have confidence that the worst is over. The high TRIN reading the other day, in retrospect, was in fact important after all. The near 3 reading showed a huge capitulatory reading of volume into Declining vs Advancing stocks. However, given that it’s still tough to make much of the trend over the last few days, which looks more like stabilization than a true market bottom, more proof is still needed that its right to be long ahead of next week. Most economists are still making the case for Rate hikes. But the market seems to believe that less and less.
Despite the choppiness in stocks, Tech continues to show very dominant performance and should continue to be overweighted as a top sector to favor.  Thanks for reading.
Also from Mark: Expect More Market Volatility Into Next Week
Twitter: Â @MarkNewtonCMT
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
