This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. A spillback into yesterday's wide range as yesterday's violent bounce is tested. Making a decent bottom, even after a relatively brief correction, is usually a back-and-forth process and not a climactic moment followed by a straight-line recovery. It's all pretty textbook so far – down open, choppy action, so far hanging above the Monday lows. It feels fragile and suggestible – it almost always does in these moments. Yesterday's low was definitely plausible as a potential bottom for this corrective phase – the urgency of the selling, spike in put-option premiums, massive trading volumes – show a radical transfer of equities from the fearful to the greedy (or at least the opportunists looking to buy for a quick pop). Yes, it's true most one-day reversals of that magnitude happened in the throes of a bear market. But it also resembles the very consequential bottoms in December 2018 and March 2020 – Monday after an options-expiration Friday, nasty selloff, violent rebound. Of course, those lows occurred after much deeper declines – 20% and 35%, respectively. The red line here shows yesterday's intraday low, exactly at the May high and somewhat below the -10% pullback line. Even if that represents a good reference-point low for this move, it's likely to be a to-and-fro tape within this wide new range for some time. Here's the zoomed-in look at the past few days and why bullish traders are looking for the index the hold up above 4250 or thereabouts. A slight undercut of the low and then a bounce might be less expected but also a net positive. This is the tactical market-wide field position. It's quite likely true that many individual stocks have seen most of the punishment they have coming to them. More than a third of the S & P 500 is off at least 20%. The equal-weight S & P 500 is holding up a bit better, outperforming the main index by two percentage points month to date. Still not the healthiest-acting market, VIX above 30, agitated, air pockets. If there's a positive it's that the key issues have been worked over in the market discourse for months: Fed feeling it needs to get tightening soon, winter consumer soft patch, ongoing rationalization of valuation excesses. Still seems the market is braced for something on the hawkish side, so Fed unlikely to radically surprise in that direction. Also not a Fed meeting with a new committee projections (the dot plot) which means Powell can massage the message more easily. We'll see if he even wants to or is in tough-love mode. Microsoft report a decent test of whether "great, as expected" results from universally loved mega-caps can firm up investor sentiment. It became probably the most crowded, trusted stock in the market, raced to above 35-times forward earnings, lost 20%, but still is more expensive than pre—pandemic with nearly all analysts still recommending it. Some think MSFT had some pulling-forward of PC and WFH-software demand, we'll see. Market breadth is weak, line 3:1 down: up volume. Expensive growth stocks still for sale. Credit conditions are OK but have softened in recent days from very strong levels. VIX in the low-30s, still several points under Monday's peak, but unlikely to relax much in the next 26 hours pre-Fed.
Traders on the floor of the NYSE, Jan. 25, 2022.
This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics.