The Market started this week somewhat strong, on Monday, the indices we up +.50% or more across the board. The only issue was that breadth was weak, a lot weaker than it should’ve been for a +.50% day. We ended the day with 150 stocks down -4% or more vs. 78 that closed up +4% or more; these are not the type of numbers you want to see when the market is up +.50%.
On Tuesday, we started on a positive note, but that quickly changed when the Manufacturing numbers came out at 10:00 am; they were weak, according to CNBC, the weakest in 10-years. The S&P 500 closed the day down -1.83%.
On Wednesday we had follow-through selling, we started with a gap down and did not look back the entire day. The President’s tweetstorm that day did not help the situation. However, the selling underneath the surface had dried up; the breadth numbers were not as bad as you would expect for a down -2% day.
While I viewed the lack of selling underneath the surface as a positive, and we were oversold in specific breadth indicators, it felt like we needed more selling, and that’s exactly what we got on Thursday morning; the S&P 500 was off -1% by 10:00 am.
The rest is history; we closed out strong, we had a strong close on Thursday and Friday, up +3.35% from Thursday’s 10:00 am low. Here’s the recap of what could be construed as a non-event week if you are looking at the closes from one week to another; the S&P 500 at one point was down -3.58%, and then it rebounded +3.35% to close out the week -0.36%. And while the market had a nice rally on Friday and maybe got above certain levels that people believe are important, breadth was as weak as you will ever see for such an up day, making the up day suspect with much to prove.
The biggest news of the week, I believe, was the discount brokerage firms slashing their commission to ZERO. Interactive Brokers announced a ‘lite’ trading platform where they will sell your order, but you will pay zero dollars to execute your order. Schwab piggybacked Interactive Brokers the next day when they announced that they are also eliminating commissions for online trading, Ameritrade and Etrade followed suit. It was not a great week for these stocks.
I think that this is a net positive across the board from a monetary standpoint, from a behavioral view I’m not so sure, this was the best take I saw on it all week.
Something else that gained a little traction with a few articles and some T.V time after I posted it was the fact that the market has done nothing in the last 18-months, see for yourself.
Where we go from here is anyone’s guess, but in last week’s post, we laid out a somewhat of a road map and how you can navigate that map, go HERE.