The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Dip-buyers
Asian markets fell overnight, especially Korea. Europe felt the pressure, as did our futures. Risk-off was the nature of our premarket. The flight to safety was in effect and yields were down substantially across the curve. At 8:30 AM, September PPI (6.3% vs 5.4% est & 5.6% prior revised from 5.4%) seemed to worsen the situation. Counterintuitively, yields fell further on that hot surprise. Equity futures didn’t change much either. The S&P opened down about 35 points and bottomed just before 10 AM. Buyers started repairing the morning damage and the S&P 500 was flat by 11 AM. It spent the rest of the day slightly positive and gathered some upward momentum at the end of the session. Capital flow was quite elevated at 124% and breadth was quite good, advancers outnumbered decliners about 2:1.
Stocks made quite an interesting turnaround today. Bonds were bid from the jump so obviously some investors felt the worries of Asia and sought safety. Early trading in stocks reflected some fear but it was erased very quickly. Perhaps some investors assume that much lower yields are much more bullish than the moment of fear was bearish. Perhaps some investors just saw this morning as an opportunistic dip, and pounced.
It was additionally interesting that the mega cap tech did not lead the market higher today. The concern in Asia has roots in the concern over the larger AI investment theme. That investors didn’t simply buy the dip by targeting the highest risk, previous vanguard of the market, is telling. Maybe investors are perceiving value in the market in the non-mega-cap-other stocks?
I am not sure why investors thought that this morning was such an attractive moment, but it was. At this point, I just want to watch the mega cap tech names versus the rest to see if we’re at the beginning of a true rotation.
Would a true rotation allow the bull to run? Again, I’m not sure but concentration is a concern in this environment so maybe the market is on its way to addressing that.
See you tomorrow.
-Mike
Visdom Market Commentary
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