Selling pressure does not seem to be easing on American stocks, even increasing. The reasons for the consolidation turning to falls is not obvious for traders: there’s been no dramatic catalyst, rather multiple negative factors which have slowly crept into sentiment.
The S&P dropped 1.15% on Friday and -3.15% on the week, the VIX scraped to its recent record (18) and a peak of 21.25 , topping its annual record of early February.
Volumes reflect the scale of clear outs made by ‘big players’: while the average daily trading volume was 450 million shares on the S&P in early September, the index traded 757 million shares on Friday.
The tide is turning, the behavior of fund managers become radicalized, and even if Wall Street seems to rebound, the lows seem more fragile than ever before.
This is the worst of 2014 so far, but also the worst since mid-May 2012. Most worrying is the break of the base of the ascending long term channel from mid-November 2012.
In a somewhat unusual way, given the atmosphere, the Dow Jones saved the day with only a -0.7% fall to 16.544Pts (yet it is in negative territory for 2014), while the Dow Transports landed at -2%.
A new phenomenon has manifested this Friday, the decline was orderly amongst tech stocks with losses contained between -0.1% and -3.5% (as Tuesday and Thursday), some levels reflect aggressive sales and the capitulation of buyers.
The managers have cash inflow by reducing their exposure to ‘heavy weight’ stocks (Microsoft plunged 4% and Intel a very unusual -5.10% to $31.9) and values displaying a stratospheric PER as Twitter (-8.85%), Tesla (-7.8%) and Symantec (-6.4%).
After nearly three years on Wall Street, traders have began to fear a bearish bias is firmly seated in a geopolitical context of the tense relations between the spread of the Ebola virus, which is beginning to worry the United States and Spain, and the challenges faced by the international coalition to contain the jihadists of the Islamic state, which have taken up more ground.
In macroeconomic terms, the publication in the early afternoon of import prices in September in the United States (-0.2%) was found to be no impact on prices.Previous Post » Caution on a Busy Week For Reporting