Buyers vs Sellers

Volume was mixed yesterday, rising on the NYSE (39.97%) and contracting on the NASDAQ (-12.15%). Equity indices were also mixed as the S&P 500 (+0.21%) and Dow Industrials (+0.06%) eked out unimpressive gains while the NASDAQ struggled all session, ultimately (-0.24%) posting a loss.

It felt as though the day was defined more by sellers stepping away from the auction than it did buyers stepping into the breach left behind by Monday’s blood bath.

Sector performances were mixed yesterday as well. Communications (-0.98%), Technology (-0.78%) and Financials (-0.59%) provided the lion’s share of the drag while Consumer Staples (+1.01%), Materials (+0.87%) and Energy (+0.85%) provided a degree of muted lift.

Given the sharp downdraft that US and global equity market investors experienced on Monday, after a disappointing conclusion to and hyper-volatile second half of the year, there is little that I can confidently point to as a harbinger for a reversal of fortunes in the near term. Earnings season may provide a context for equity market engagement within the next several weeks but even in that event, the geopolitical and global economic backdrop continues to deliver news and surprises that undermine the prospects for a meaningful move higher in the near term.

As I mentioned in yesterday’s note, as a result of Monday’s distribution day, all three major market indices closed below both their respective 50 DMA and 200 DMA. Additionally, the market direction shifted from “Under Pressure” to “Correction”.

Any resilience that did materialize yesterday in the broader market was really a result of two principle themes; themes that have ironically been the source of so much panic in the market in recent months. As I suggested in yesterday’s note, Chinese equity markets were buoyed by aggressive PBOC liquidity steps taken in the overnight. Crude oil has also found a formidable ally in chaos. The continuing unrest and simmering tensions between Saudi Arabia and Iran have fueled speculative buying and a resultant faux bid for black gold. In the event the recent unrest settles down, look for crude to once again fall prey to glut concerns. Those concerns may or may not receive some support to with the release of the EIA Petroleum Status Report.

Yesterday’s Economic Calendar was light. Auto Sales for December (17.3M) were modestly lighter than consensus expectations (18.1M). However, the Domestic Vehicle Sales component (14.2M) of the report came in higher than the 13.9 that was expected. The Gallup Economic Confidence Index (ECI) was -11 versus the previous month’s -13. Redbook Y/Y was 2.9% in line with expectations and the previous month’s reading of 2.5%.

Today’s Economic Calendar is significantly more dense. All of today’s reports have the potential to impact our directional trade. The report that has the greatest potential to impact the flimsy stall that materialized in our recent downdraft will be the EIA Petroleum Status Report at 10:30 AM EST.

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