This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. A much heartier rebound rally today, though without quite clearing some hurdles that would push the indexes out of the weeks-long choppy pullback zone. Overnight and morning action showing more forceful buying urgency, with more than 90% advancing volume on NYSE, as traders apparently see reduced China "tail risk" combined with an abundance of oversold stocks and a pending Fed decision as reasons not to lean too negative. The S & P 500 ran slightly above yesterday's morning high and is bumping against 4,400. The "gap" left by Monday's opening drop stretches up to 4,433 or so, which makes it something of a first stop and borderline between "just a bounce" and "possible full recovery underway." The longer-term look shows that's also where the July-August break to new highs got rolling. Coming into the day, the percentage of stocks that were statistically oversold vs. overbought got extreme, too, based on Bespoke's calculations: As noted this week Treasury yields have stayed firm, credit markets have been steady, suggesting the jitters and positioning imbalances were in stocks. Overnight news of Evergrande making an interest payment on China's first open business day of the week was nicely scripted/timed to deliver a rush of relief. All this says plenty about the market's ripeness for a bounce. But the market will only reveal what factors really hold sway once we see the reaction to the Fed, ongoing margin stresses due to labor/supply strains (FDX, etc.) and the rest. Just as everyone has internalized the slowdown story for GDP and earnings growth – and as cyclical parts of the market have lagged since early June – we're getting a bit of a bounce in the Citi Economic Surprise Index. Sure, it's partly due to economists trimming forecasts, but a welcome possible pivot. As noted, early market breadth quite strong and if we stay over 90% upside volume on NYSE we'll be treated yet again to the stats on how such "breadth thrusts" – when they happen in clusters, especially – tend to bode well for stocks looking out weeks/months. VIX is giving way, with the China scare apparently taken more seriously than one would expect by hedgers and of course the market itself putting some distance between itself and the lows. A nice spike peak in the VIX chart, though above 21 still implies a somewhat agitated tape – might plunge post-Fed if the market takes the expected message to heart, about how tapering soon is benign, appropriate and not a prelude to real tightening.
Traders work at the New York Stock Exchange (NYSE) in Manhattan, August 3, 2021.
Andrew Kelly | Reuters
This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics.
- A much heartier rebound rally today, though without quite clearing some hurdles that would push the indexes out of the weeks-long choppy pullback zone.