Mike Santoli’s market notes: Air pocket risk, winners become losers, key S&P level to watch

Published Mon, Jan 4 20211:26 PM EST

This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. Some deferred selling and renewed focus on near-term tactical risks knocks the market from its highs to shake out some complacency. For weeks the market was riding an upward seasonal grind, overbought but imperturbable. Along with many we've been pointing toward January air-pocket risk (as in 2018, 2020 following strong Q4 rallies). Easy to point to Dem gains in Georgia netting markets, culling of 2020 winners in a new tax year, Middle East unease, political war of electoral college, new Covid strain. It all plays a part, no doubt, but easy also to imagine the market shrugging these things off if the tape weren't due for a little test and a rest. Plenty of big losers today among last year's top S & P performers: ETSY off 3.4%, PYPL down 1.8%. FAANG weak across the board, which defies any sort of "flight to quality" trade. The morning flush has taken the S & P slightly below the breakeven level for the Santa Claus Rally period (the Dec. 23 close). There's really not much to make of this aside from a modest perceived negative implication, though this almanac stuff has become pretty squishy and over-studied. Next thing to watch is around 3630-3640, the area that capped the market for most of November after the Pfizer pop. One of the years I mention in my column with some resonance for today is 2010, which had a pretty stiff early-year pullback and plenty of chop. The wild 1999-style stuff we've all been watching has meant a sudden culling of the flock – massive speculative winners – is always a possibility. It's a jumpy mix – a market with such a high adrenaline-to-serotonin ratio always makes for sharper moves. Decent rally in Treasuries, 10-year yield down to 0.9%, not quite undoing its recent uptrend but not far from that. Credit spreads softer, dollar recoups some earlier losses - definite risk-off tone, though not urgently so. Gold catching a slight bid. Market breadth is negative but not nearly as skewed to the downside as one might expect. Nasdaq 2:1 negative, NYSE 3:1. Read Santoli's latest column here.

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

Some deferred selling and renewed focus on near-term tactical risks knocks the market from its highs to shake out some complacency. For weeks the market was riding an upward seasonal grind, overbought but imperturbable. Along with many we've been pointing toward January air-pocket risk (as in 2018, 2020 following strong Q4 rallies).