Mike Santoli’s market notes: Indecisive action, Tesla and Zoom bounce, investors cut risk

Published Thu, Sep 10 20202:02 PM EDT

(This story is for CNBC Pro subscribers only.) This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. Tentative, indecisive action so far. As the Cantor trading desk puts it: "market feels nervous in both directions" after the August ramp, the three-day dump and a decent bounce that nonetheless didn't even get the S & P back to where it ended last week. Market today rewarding domestic recovery/reopening plays (travel, casino, chain retail/restaurants) most still deeply underwater looking back six months. Equal-weighted consumer discretionary is up, beating the S & P 500 by half a percent midday. Some ongoing bounces in the growth leaders that corrected the most ( Tesla , Zoom ) but not a broad dip-buy in the Nasdaq. Not a ton of macro drivers, but the US dollar seems to be an influence. Dollar rushed lower vs euro after status-quo ECB decision, then bounced, coinciding with equities backing off. Intraday action in S & P 500 and US Dollar Index here: Three days and 10% on the Nasdaq relieved some of the overbought/overconfident extremes but hardly qualifies as a major reset. Skittish action today with failed rallies in semis, FANG suggests crowded growth sectors still being sold into strength. In the past one-day Nasdaq rallies exceeding 2.5% (such as yesterday's) after a pullback have not been reliable signs of a trading low – weakness on average of the following week, for what that's worth. Short-term sentiment is twitchy. Still a ton of retail call-option buying going on – this crowd will not easily be discouraged with the easy upside from August fresh in mind. Yet other signs more traditional investors cut back on risk pretty quickly last week. NAAIM weekly exposure came way down: And the weekly AAII retail investor poll is back to a net bearish extreme, similar to late-June. These things do not support the idea that investors are stubbornly assuming an easy rally from here. These are not good timing cues, and the over-optimistic extremes built up for weeks in many areas, so could need time (and price) to burn off. But the pockets of caution cropping up are better for the market's chances of finding its footing before too long than unwavering bullishness would be. Weekly unemployment number wasn't great but close enough to forecasts not to alarm too much. Some sense upticks in CA/TX fire/weather related. Sideways/stalling of the recovery at current activity levels would not be welcome by investors but most real-time indicators say things are holding up OK. Aggressive Nikola short report getting some traction as the company is portrayed as mostly hype. Still, one could argue the GM production deal in itself could be self-fulfilling, making a real company out of Nikola even if it wasn't much of one before? Still in pretty normal, corrective pullback mode. A 10% correction in S & P 500, should one happen, gets it back to early-July levels – not a major downturn, but would certainly feel like the makings of one. Dealing with some seasonal headwinds and some froth to work off, along with agitated volatility-insurance prices due in part to election suspense. Still think most of the worrying and hedging will be done by the time the votes get cast. Breadth not all that bad, roughly evenly split – continues to outperform the indexes on down days.

A man lies on a bench outside the New York Stock Exchange (NYSE) on July 13, 2020 at Wall Street in New York City.

Johannes Eisele | AFP | Getty Images

(This story is for CNBC Pro subscribers only.)

This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics.

Tentative, indecisive action so far. As the Cantor trading desk puts it: "market feels nervous in both directions" after the August ramp, the three-day dump and a decent bounce that nonetheless didn't even get the S&P back to where it ended last week.
Market today rewarding domestic recovery/reopening plays (travel, casino, chain retail/restaurants) most still deeply underwater looking back six months. Equal-weighted consumer discretionary is up, beating the S&P 500 by half a percent midday. Some ongoing bounces in the growth leaders that corrected the most (Tesla, Zoom) but not a broad dip-buy in the Nasdaq.