Trader Talk: Yesterday’s sell-off is looking like a one-day event

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Yesterday's sell-off is looking like a one-day event for the moment. There is little follow-through to yesterday's selling. Market internals are placid: The advance/decline line is about even, the VIX is down, and in contrast to yesterday's 43-point swing in the S&P 500 today's move from high to low is only 15 points (about a typical day). Volume is bordering on heavy.

Yesterday was what technicians call a distribution day, a day when stocks were down big on higher volume. There were four stocks declining for every one advancing at the NYSE, six to one at the NASDAQ.

It means that a lot of big holders of stock were selling.

But for traders to be convinced that institutional sellers were really dumping stock you would need a series of distribution days close together. We haven't seen that yet, and today's action —so far — indicates it isn't happening today.

Technical analysis service Lowry's, surveying yesterday's damage, noted some short-term issues for the market but concluded, "There are, as yet, very few signs suggesting weakening in the intermediate or primary uptrends in the market."

Nor do I know of any strategists taking down estimates in light of yesterday's developments. This morning, JP Morgan's Equity Strategy Group told clients they were maintaining their year-end S&P 500 price target of 2,400 and raised their estimates for S&P 500 earning this year to $130 from $128 on better earnings growth and guidance.

But the strategists there also acknowledged that there is indeed a premium in the market for the Trump agenda, and concluded, "We see limited room for equity multiple expansion absent further progress on the pro-growth agenda in Washington."

More troublesome is the continuing decline in 10-year yields. The spread between the 10-year and 2-year was below 100 basis points this morning, the narrowest spread since the election. This flatter yield curve — it's been going on for a couple months — is killing banks, many of which are already in correction territory from the 52-week highs in early March:

Banks: correction territory

(from 52-week highs)

Zions down 18.6%

Fifth Third down 18.0%

SunTrust down 12.5%

Bank of America down 12.0%

JPMorgan down 10.9%

  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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