Mike Santoli’s market notes: Apple is standoff stock, key market level to watch, sell-off over?

Published Tue, Sep 22 202012:47 PM EDT

This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. (This story is for CNBC Pro subscribers only.) "Is that all there is?" Bulls asking this of the three-week correction, bears wondering if that was it for the reflex bounce yesterday off the down-10% level and the YTD breakeven line for the S & P 500 . Mild chop today after the recent swings. Further bounce in the mega-cap growth complex, the stocks that led both up into the August extremes and down this month. Apple is quite the standoff stock, fighting it out around the unchanged level after yesterday's upside reversal. On the plus side: Monday the sell-off broadened, creating a bit more sense of "nowhere to hide," even if there hasn't been much outright fear evident. Noted last week the pullback strictly in the major Nasdaq names everyone agreed were overheated while economic-recovery groups did fine felt a bit too gratifying to the consensus. In bull markets, buying breaks of the 50-day moving average tend to have a decent risk/reward profile. We did so in recent days. The VIX failed to rise much even as the market sank to new short-term lows midday Monday, a mismatch that can be seen as suggesting not much more downside is immediately in the cards. Still not much macro/credit stress accompanying this pullback in stocks. Credit indicators have softened a bit, but still OK. On the minus side: Is a 9.9% drop for an instant a bit too cute a plot point for that to be a significant and reliable low for this retreat? Been a pretty scripted sequence: Market tops the day of Apple/ Tesla stock splits as the weakest month of the year begins and a new football season pulls away the small-time bettors. But still. Corrections are an interplay of price and time adjustment, not clear this has chopped along for long enough. Also has taken most sentiment/tactical gauges from over-bullish to around neutral, but not washed out. Not that people should be desperately afraid after this routine correction, but without very oversold/pessimistic readings, rebound rally is probably pretty restrained if one gets rolling. Seasonal patterns still a headwind, though this effect wanes into month-end. Saw a huge outflow from QQQ ETF Friday, led some to read it as capitulation by tech bulls, but the massive inflows in the summer stayed extreme for a long time. And saw a huge flush of new cash into QQQ yesterday, implying this is mostly the echo of dealer hedging/tactical offsets to other positions. Unclear the market really wants or expects anything else from Jay Powell in Congress today and this week. The baseline is set: Zero rates for years, erring on the side of more not less accommodation. Stocks backed off this morning after Evans of the Chicago Fed was quoted saying the Fed could hike rates theoretically before inflation reaches 2%, but this is not doctrine and quite a remote prospect for today's purposes. S & P banks as a group continue to hemorrhage value, down another 2% today. Up only 27% from the March low and off 40% from the pre-Covid high. Really bearing the brunt of the absence of fresh stimulus and inert balance sheets stuffed with deposits and Treasuries. At what point do these stocks become a worrisome macro signal of their own, or is it simply OK that they become the economy's sacrificial offerings? Market breadth not great, even on Nasdaq which is up more than half a percent. Brutal breadth reading yesterday, shows it's still an erratic tape. VIX quiet but range-bound above 27. Not really tipping its hand as to the next move, likely will stay juiced given political season and recent wide swings.

A man walks a dog in the shade away from the midday sun past the New York Stock Exchange (NYSE) building in Manhattan, during hot weather in New York City, New York, U.S., August 11, 2020.

Mike Segar | Reuters

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

(This story is for CNBC Pro subscribers only.)

"Is that all there is?" Bulls asking this of the three-week correction, bears wondering if that was it for the reflex bounce yesterday off the down-10% level and the YTD breakeven line for the S&P 500.
Mild chop today after the recent swings. Further bounce in the mega-cap growth complex, the stocks that led both up into the August extremes and down this month. Apple is quite the standoff stock, fighting it out around the unchanged level after yesterday's upside reversal.