Santoli’s Wednesday market notes: S&P 500’s holding pattern saps momentum the longer it persists

Published Wed, Jun 9 202112:52 PM EDT

This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. Holding patterns don't hold much steadier than this one. Multiple days of minimal index movement, tons of excitement and indiscriminate chasing in the marginal stocks but monotony at the core. This prolonged calm and general firmness below the surface still seems to leave the probabilities tilted slightly in favor of a break higher (as the next sizable move, not necessarily immediately). Yet there is also a loss of energy, waning momentum and more stocks falling by the wayside the longer this stasis persists. Here's the S & P 500 since the closing record high May 7: Treating 4,230-4,240 as if it matters for some reason. Probably means if it punches through there will be at least a chase attempt, with systematic traders dialing up exposure (especially if VIX sinks even lower). For now comes off as indecisive. Since S & P was right here at the all-time high a month and two days ago, oil exploration stocks are up 13%, homebuilders down 10%, with tech up small. So plenty of to-and-fro underneath the index. Mean reversion: Number of S & P stocks above their 50-day average was over 90% in April, now down to 67%; for Russell 2000 and Nasdaq over the same period that measure has jumped from under 30% to above 60%. On an intraday basis, yet again bank stocks' weakness almost fully absorbed by growth/tech firmness. Energy groups in breakaway mode, and the question is "How much is left?" The XOP is up 150% off the low and right at its January 2020 high. At that old high, oil was around $64, now above $70. Debate is fair around how much to pay when presumably the economy is becoming a less-intensive user of the commodity all the time. But this argues against the idea that the group is running purely on fumes. So much scrutiny of the 10-year Treasury yield sinking back under 1.5% for a bit today. Many factors: The acute spring 2021 inflation scare has dissipated; supply/labor logjams are complicated the economic acceleration story; global investors are grabbing for yield; pension rebalancing creates a steady bid for bonds; the market believes the Fed about its deliberate slow-walking toward policy shifts. Perhaps least appreciated, the yield was as "overbought" – as stretched above its long-term trend – as it has been in many years at the end of Q1. This is a long cooling-off process working off those extremes. Will this change with the CPI release tomorrow? We'll see. The yield spent so little time between 1.4% and 1.5% on the way up it might have to test those waters a bit. Holding the early March low near 1.41% might be important if it comes to that. The meme stuff has grown noisy. Lots of unstable momentum moves in these stocks, exhausting demand for call options in the very short term. Still not spreading pervasive short-seller stress or broad portfolio liquidations though there is a bid to the VIX, now above 17 in a dull tape, which could be due to the fattened premiums and hedging needs from meme-stock flows. Market breadth is very mixed, slight positive tilt. Like much else in the market, it looks balanced, indecisive and ambiguous.

Traders on the floor of the New York Stock Exchange.

Source: NYSE

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

Holding patterns don't hold much steadier than this one. Multiple days of minimal index movement, tons of excitement and indiscriminate chasing in the marginal stocks but monotony at the core.