This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. Indexes idling in the muddy middle of pullback territory. As technical triggers fire and fizzle and tactical traders try to be the second mouse grabbing the cheese, the fundamental-minded investor is holding still ahead of a possibly consequential CPI report, the start of earnings season and the swing back to company-specific drivers. Here's the messy chart set-up – short-term downtrend (lower highs each bounce), caught below a sliding 20-day average and flat 50-day, trying to make the 100-day average matter as a bottoming area as it was almost a year ago. Too cute to expect a close replay, or just cute enough? Is it plausible that last Monday's intraday low in the S & P 500 around 4,278 was the low for this corrective period? Sure. If not there, then maybe 1% to 4% below around the summertime lows? Why not. Plausible, though tough to have very high confidence in any particular scenario until we see more sustained buying demand at these levels. In markets under pressure for six weeks, the prospect of a sharp break in either direction feels real. The market always hints for conviction and sometimes needs to move the price more to find those who possess it at those levels. The inflation/shortage themes have become all-consuming, so to speak. With good reason, of course. Earnings season and stocks' reaction to what we know will be a litany of "we're trying to sort it out, costs are going up" management calls will tell us whether the grip of these issues is loosening at all. Here's how the bond market (in its inherently imprecise way) is pricing the five-year inflation outlook. Near springtime highs, near 2011 peak (close to 2008 levels) and a bit above the Fed's comfort range. On alert but not in runaway-panic mode. Oil prices are a direct driver of headline CPI, of course, so part of the breakeven move is just math. As slippery as the footing has been in stocks, a look inside still shows a market trying to regroup after the vast majority of stocks had 10% to 20% drops and a touch-and-go rotation toward reopening/re-acceleration plays is underway. Canaccord Genuity notes the bounce-back in the cyclical S & P sectors since their summer retreat. The two-year Treasury yield ripping to a post-Covid high bakes in some approaching Fed tightening risk, though of course this is partly just the passage of time. Two years out is October 2023, when most expect at least a couple of rate hikes. Market breadth is solid today, about 60% upside volume with small-caps and the average S & P stock outperforming. Credit markets continue to be imperturbable, no signal here if macro risk or portfolio stress building up to any alarming degree. VIX calming down only slightly, just under 20, still on alert for continued late-day fades and failed bounces as the CPI report looms.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., September 29, 2021.
Brendan McDermid | Reuters
This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics.
- Indexes idling in the muddy middle of pullback territory.