Mike Santoli's market notes: Key S&P levels, earnings first take, crowded stock shakeout

Published Wed, Oct 14 20201:37 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. Market feels some mild shudders as overheated growth names continue to cool off. Noted Monday the three-week ramp to the recent highs was steeper and faster than the run into the Sept. 2 peak, makes this choppiness look so far like a benign consolidation for now. The S & P has slipped back toward Friday's close, which would fill a gap on the chart. Bulls are looking for the index to hang above the 3430-ish area it surpassed last week which broke it out of a former sideways range, so another couple percent of downside to play with before that's cracked. The pressure today coincided with yet more headlines making a fiscal deal seem unlikely, but the action doesn't really fit with this being a direct reaction to those reports. It's disruptive/stay-at-home tech leading the way down, with value, energy, industrials and other cyclical areas holding up better. Cloud software (CLOU down 2%) and e-commerce (IBUY down 1.2%) in pullback mode, AMZN disgorging some of the Prime Day fluff in the stock. Nothing looks like any kind of trend change, just somewhat crowded stocks undergoing minor shakeouts at this point. Stocks are not trading all that well off of earnings the past couple days, with BAC and UNH – and even GS – joining C, DAL, FAST and JNJ yesterday in negative or muted reactions. Doesn't mean this will now be the rule, but does hint that the market was already fully expecting big and consistent beats vs. forecasts for Q3. The direction of forward guidance and estimate revisions remain pretty good, though. Did investors rush from fearing election volatility too much to embracing the idea of a market-friendly election outcome to eagerly? Perhaps in the very short term. Hedge-fund leverage is at the top of its five-year range, according to Goldman, and we're still seeing massive speculation in tech call options by small-timers. There's been a huge spike in trading of VIX puts – a bet on lower volatility/firmer equity markets. But other readings of investor cash positions and surveys seem more neutral. Market breadth is not particularly weak today, suggesting most of the downside impact from mega-cap tech and momentum-tech names. NYSE close to 50/50 advancers/decliners. Credit trades off just slightly, but high-yield debt spreads hit a new post-Covid low this week, showing healthy risk appetites and no real financial stress rising. VIX again up smallish, close to 27, juiced by the residual election-hedge bid.

(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.

Market feels some mild shudders as overheated growth names continue to cool off. Noted Monday the three-week ramp to the recent highs was steeper and faster than the run into the Sept. 2 peak, makes this choppiness look so far like a benign consolidation for now.