Market opens sharply in the green again, although yesterday’s explosive open resulted in red. There was a 40-point swing on the S&P and nearly 400 points on the DOW from peak to trough. It was the largest intraday reversal in nearly 2 years. There is nothing Bullish about that. Buyers are stepping in this morning, playing the same strategy from 2017: Buy the Dip. It will be interesting to see how today and the rest of the week play out. Mean reversion is necessary. A healthy correction is required. At 394 days and counting, this is now the longest stretch ever without a 5% correction for the S&P 500. Perhaps this is the beginning of some normalcy. The Volatility Index jumped 14% yesterday. It remains near historic lows. Earnings are picking up and BofA is leading the charge. Rising interest rates, an accelerating US economy and tax cuts are providing a powerful combo for banks. North and South Korea will march jointly under one unified flag during the opening ceremony of the Winter Olympics, the biggest sign yet of a detente after months of tensions over Kim Jong Un’s nuclear program. Bitcoin cracked below $10K this morning. It has now been cut in half from its all-time high reached late last year. The bubble bursts. No doubt buyers will attempt to buy weakness, but many Bitcoin owners are trapped with cost basis much higher than current levels, and will be looking to unload at any chance. Investor psychology has crept in. Behavioral Finance 101 is at play. Jay Powell is expected to be confirmed as the new head of the Fed today. Janet Yellen’s term ends next month. The government is set to shut down unless a Congressional deal can be passed by Friday. Here we go again. Biotech is catching a bid with rumors that Celgene is going to buy Juno Therapeutics. More M&A would be good for the space. Commodities are taking a breather after a massive multi-week run. Global growth and a little inflation has been the driver. We see more of this ahead.
Have a great morning,
Mike Frazier
