Y’all want this party started, right?

Y’all want that party started quickly, right? – “Set It Off”

Yesterday, the Consumer Price Index (CPI) number wasn’t released, but it didn’t stop more Fed officials from voicing an opinion that inflation is too high, and therefore, the Federal Open Market Committee (FOMC) should hold off on a rate cut in December. One Fed official says policy is “barely restrictive.”

Investors thought the party was just getting started, but forgot the punchbowl; the hawks on the Fed want to turn off the music completely.

The Dirty Little Secret

When the Fed removes the punchbowl, there is nowhere to hide.

Market breadth was extremely bearish across the board.

• Decliners swamped advancers
• New lows edged out new highs
• Down volume was significantly higher than up volume

There was a mad dash for the exits.

Market Breadth	NYSE	NASDAQ
Advancers	611	981
Decliners	2,174	3,765
New Highs	86	107
New Lows	91	280
Up Volume	1.11 billion	4.14 billion
Down Volume	4.31 billion	7.19 billion

 

Low volatility held up. Not only was it red across all extended factors, but it was also deep red, indicating panic selling.

Fear & Frustration

Back in the ‘extreme fear’ zone.

Individual investor bearishness has popped to 49.1%.

And the Volatility Index (VIX) popped more than 14%.

Back to the 50-day moving average, watch out for the S&P 500 (SPX) after holding impressively earlier in the week.

Older blue-chip names gave investors some comfort, as the only sector to finish the day higher was Energy (XLE).

How Strong is the Consumer?

It's not lost on me that the Consumer Discretionary Sector (XLY) was the most severely impacted, just as the chorus of Fed officials expressed concerns about inflation and the state of the economy.

• Disney (DIS) was hammered yesterday after it posted its results
• Cruise liners have been hammered after posting earnings
• Live Nation Entertainment (LYV) was hammered after it posted its results

And yesterday, after the close, StubHub (STUB) was hammered.

It seems impossible that they could be losing money, considering how expensive it is to order event tickets. The company just completed an initial public offering—another IPO stinker. Interestingly, periods of market tops are usually associated with IPO fever; however, only a few names have gone public this year, and most have always had household recognition, which garnered attention (suckers) from the outset.

The SPDR S&P Retail ETF (XRT) is looking weak again, but members of the Fed need to see more data.

Hedge Funds aren’t waiting; they have dumped consumer service businesses and are now significantly underweight.

We begin today’s session with a potential rate cut now being a 50-50 proposition, when it was once a 95% certainty.

Today’s Session

Obviously, the bias has shifted to the downside, but in such a way that names I once thought we might have taken profits too soon are now entering buy zones.

Some are getting close to screaming “buy zones,” but this is a situation where we must wait for the flush to finish.

I also think there will be anxiety next Wednesday when Nvidia (NVDA) reports. Cash is still flowing into equities, as well as money markets, which is the best “fear gauge” now.

If buyers show up today, it would be awe-inspiring.

Tweet

 

Home | Products & Services | Education | In The Media | Help | About Us | Disclaimer | Privacy Policy | Terms of Use | All Rights Reserved.