Step 2 In The Bottoming Process
Boy did it look like folks did not want own risk assets heading into the weekend. And that’s the normal behavior during geopolitical events. Friday’s late afternoon swoon accomplished step two of the bottoming process which was breaching the high momentum low from last week and creating some very short-term divergences that can support at least a bounce.
Do you see how the S&P 500 in the first chart made a lower low on Friday? In the second chart, the Volatility Index (VIX) did not. That shows less momentum as prices moved lower which a positive sign, not a buy signal. For a 6% stock market pullback, that could be enough for a low. I kinda doubt it, but time will tell.
On the key sector front, only semiconductors are balking at the pullback to new lows. Banks, consumer and transports look like the S&P 500 or worse.
Finally, high yield bonds also behave worse than the stock market, having fallen much lower than than S&P 500 relative to last week’s low.
Bottom line, the stock market is positioned for a bounce, but I do not sense that the final low is in just yet.
Although the UCONN men did not match their female counterparts with a Big East tournament victory, it was still a great time in NYC. Over the years we have gotten to know so many great UCONN supporters and this year, our friends and their family joined us. I did do a very scientific bagel tasting at Essa, Liberty, Best and Bagel Pub in my lifelong quest to find the best bagel.
On Friday we bought more MQQQ and QLD. We sold SN, TMO, KCE, some GOOG, some PFF and some MDY.
