Santoli’s Monday market notes: S&P 500 holding above key level for bulls

Published Mon, Aug 9 20211:09 PM EDT

This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. Modest slippage in the indexes from the record highs, but the familiar rotations are keeping things orderly after a week when money found its way back toward "recovery/reopening" plays. The market uptrend has slowed again, the average stock has some catching up to do, but holding above 4,370 on the S & P 500 means things are on track. Often the case that the kind of intuitive, straightforward Jobs Day rally like we saw on Friday is tested the following week, which maybe was this morning's business, with dips in Treasury yields/banks/industrials that have now firmed up a bit. The index has now gone 11 straight weeks making a new intraday high – one of the longest such streaks on record (source: Instinet). When prior streaks have ended, there have been a couple of stiff downturns (declines of 15% to 20% in '97 and '98) but more often no real reversal and no major, decisive market tops. It's all pretty tentative and contingent at this point. Not an enthusiastic push into economic-acceleration themes, but the constant baton-passing (banks to tech and back, WFH to travel and vice versa) show a kind of market homeostasis at work, with little across-the-board selling pressure. Bond market chart and pretty extreme inflows into Treasuries are building the case that we've seen short-term lows in yields for the moment. Is the market straining to project a Covid-case peak in coming weeks, as many of the leading indicators suggest? Just more of the ebb-flow between cyclical and secular-growth assets that has gone on for a year now? If a stiff pullback tends to require both overconfident investor positioning colliding with tightening financial conditions, we don't really see that combination on display. Liquidity indicators off their loosest readings, but still quite generous. And an uptick in hedging action evident in the total put/call ratios (index and single-stock options) argues against the idea that investors are complacent here. Yes, August is tough historically, but we've repeated this constantly. Everyone knows it. If risk assets hold up well in the face of this fact, it shows underlying strength, not reckless disregard of the hazards, most likely. Earnings-forecast momentum is impressive but starting to grow a bit more uneven. The S & P 500 is less expensive on forward price-earnings now than it was at the start of the year, with the index +18%. Yet if we're in for a return to the norm in 2022 when earnings estimates start out too optimistic it should mean a lumpier, less bulletproof market. Market breadth has improved over the course of the session, but still on the weaker side. More stocks down than up. VIX up a point is part just the usual Monday rebuild but probably also speaks to that hedging impulse noted above. Traders taking advantage of cheaper protection given the calendar and uncertainties of Covid interacting with back-to-school and the Fed's taper plan.

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.

Modest slippage in the indexes from the record highs, but the familiar rotations are keeping things orderly after a week when money found its way back toward "recovery/reopening" plays.