This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. Constructive follow-through to yesterday's snapback rally as the capital markets relax again after clenching up in a concentrated little growth scare. For now, the lesson remains that buyers will jump in on drops to around the 10-week moving average, which is another way of saying the market is holding to its intermediate-term uptrend in textbook fashion so far. The one-day, all-inclusive rebound of yesterday looks quite similar to what we saw in late June post-Fed meeting – a quick drop to the 50-day average, then a one-day burst higher to make up most of the loss followed by a half-percent follow-through gain. Worth noting that little gut check let the market regroup and push higher but hardly created escape velocity. It was about a 5% run up, then the latest 3% drop. More a to-and-fro grind than a high-momentum levitation. The action continues reminiscent of the 2013 market to a degree, up a similar amount into July, stocks had to digest a huge yield surge then a fast decline, sideways choppy summer, but ultimately a strong, low-volatility 30% full-year return. This defines the upside case, not the baseline scenario, probably. The bounce action has rescued the cyclical trade from truly surrendering a claim on market leadership. Energy, transports, banks all responding to washout-type conditions, small-caps (with a lot of ground to make up) outperforming again today. Reasons to remain on alert: The S & P is still ~1% off the highs. There were weeks of poor breadth preceding the recent index hiccup and this can mean a less-solid rally foundation. Seasonal turbulence into and through August has been the rule especially in the Jackson Hole Fed confab era. FWIW: Too much is probably made of relatively small moves in Treasury yields here – not every tick is calibrated closely to real-time macroeconomic pulse. But directionally the lift in yields allows equity traders the comfort to top up risk exposures a bit. Single-stock earnings reactions again getting more attention with a somewhat more settled macro mindset. Discomfort with a stable, maturing Netflix that seems content simply to grow with the streaming pie and not much more. Not particularly bullish for Disney if NFLX gets de-rated, given that the market has rushed to grant a NFLX-type valuation to Disney's narrower streaming biz. Chipotle being anointed into the Great Eternal American Brands portfolio alongside NKE , SBUX , DIS, with the stubbornly rich valuation that goes with it? It would seem so. Market breadth quite strong again, a plus, some 90% of NYSE volume to the upside. We see a lot more extreme breadth readings these days with all-or-none systematic trading but two near-90% upside volume days in a row is a positive demand signal that probably shouldn't be dismissed. VIX receding as it should be, under 19. Maybe the recent lows are the floor given seasonals/delta, but resumption of slow summer grind should be reflected in lower vols. If it doesn't happen, would complicate the bull story.
Trader on the floor of the New York Stock Exchange, July 15, 2021.
This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics.
- Constructive follow-through to yesterday's snapback rally as the capital markets relax again after clenching up in a concentrated little growth scare.