The market was holding a pretty good bounce when news came across the tape that Peloton (PTON) was halted for trading. Then, word spread quickly that the company would stop making connected fitness products – you know, the main products; perhaps, they’ll branch out to fitness hoops now.

Say What?

My first reaction wasn’t surprising; it was anger. In the last few days, we learned the insiders sold half a billion in stock and saw videos of management laughing about how unproductive the company was, resulting in mass layoffs. I was pissed off because I knew this would wreck the market.

Guests on my show Making Money thought I was laying it on too thick, but I bet they thought about my anger as the market lurched into a total freefall. Investor confidence is frayed; there is so much crap going on, including the grift of Special Purpose Acquisition Companies (SPACs) and the avalanche of Initial Public Offerings (IPOs). Insiders dumped billions in stock and the U.S. Securities and Exchange Commission (SEC ), promising action but only delivering TV interviews to anyone not named Charles Payne.

The market has other challenges, but this credibility issue can’t be fixed with rate hikes or a correction.

The Best of Times – The Worst of Times – The Same Session

Yesterday, at 10:30 a.m., it felt like we could all breathe a sigh of relief even if there were unanswered questions and more hurdles ahead. But once the rally failed, it became the ultimate sell signal.

Just about every stock finished down at the close, the inverse of where they traded one hour into the session.

Retail Slammed

Still reeling from that retail sales report, and other issues,  the SPDR S&P Retail Exchange-Traded Fund (XRT) responded to the Peloton news first. The reaction was a swift and powerful move to the downside. The XRT has been more vulnerable since failing to get back over the 200-day moving average.

Utilities (XLU) edged out the tiniest of gains; otherwise, the misery spread rather evenly.

Pavlovian Retreat

If it weren’t for PTON, you would get the feeling that it would have been something else. The last-hour selloffs are now self-fulfilling, and it doesn’t take much to set them off. I’m looking for a big buy program into the close as one of the tests to determine when the coast is clear.

VIX

Interestingly, the CBOE Volatility Index (VIX) is nowhere near where I thought it would be, considering the velocity of the selloff.

Summation

Last night, the CEO of Peloton said the report about the company halting production wasn’t true. I hope so, but this thing sticks.

Despite that and the pain and frustration you feel, you still have to be in the stock market. That doesn’t always mean one is 100% vested, but one should stay in the mix and be ready to go. I can’t tell you the day, but the more manic the market is, the closer we get to the bottoming process.

Lights Out

After the close, Netflix (NFLX) said they were getting into the exercise bike business. Nah, not really. The company laid an egg, and the shares were slammed 20%. 

Management blamed the strong U.S. Dollar, which might be true, but that also means relying on more subscribers outside the United States, which means limited power to hike prices like they just announced for U.S. customers. Profit margins turned lower, and that was the crusher. 

Honestly, I don’t binge-watch much, but I know folks that are hooked. But it’s a crowded field now with even more junk to skim through.  It’s too bad, back in the day, the TV would simply go off, and we would go to bed.

Portfolio Approach

There are no sector weighting changes in our Hotline Model Portfolio.

Today’ Session

Downside pressure remains in place, but it’s really interesting that the ten-year bond yield has mostly been spinning its wheels.  The kind of carnage in Technology would suggest a yield around 2.25% or higher.

Today’s session is a great backdrop to test the buy the dips crowd.  To buy ahead of next week’s FOMC and the slate of big the earnings would send a heck of a message. 

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