This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. A relentless, determined, yet still not quite panicky liquidation has the indexes in its grip, dragging it to "lower lows" for this correction and now encompassing some 2022 winners such as energy stocks. The VIX still under 35 and the steady angle of decline all morning and the decent little bounce once the European markets closed at 11:30 a.m. Eastern time all point to that "not quite panicky" status, for now. Still, we have another day of 90%+ downside NYSE volume, which gets us toward the status of a comprehensive flush — except multiple 90% down days can often mean something more treacherous underway. As detailed in this past weekend's CNBC Pro column , a variety of analytical approaches are getting to potential downside targets clustered between 3,800 and 3,900 on the S & P 500 — at this point just a few percent down from here. It's an area first reached in the Q1 2021 burst of enthusiasm for meme stocks, the peak in disruptor names and another rush of simultaneous enthusiasm for both dominant pandemic plays and reopening sectors. Nothing is a foregone conclusion — not reaching that zone, not getting there directly from here without a good bounce first, and not stopping there if the decline deepens. But it's a decent area to consider given the focus of technical, fundamental and historically mindful handicappers in this area. It would be a return to the post-March 2020 trend line, a near-40% pullback of the entire pandemic rally's gains and roughly 16x forward earnings, which would normalize valuation relative to bonds. The unwind in tech now has a life of its own, with momentum investors long gone, "never sell the winners" adherents selling and now questions about stress in big portfolios that hold the huge Nasdaq Composite stocks forcing more position trimming. Word of cost discipline, layoffs and tighter leashes on start-ups all echo the 2000-2002 ethos, if not yet nearly as severely. These are bigger, better companies now, but they made people a ton of money in recent years and folks seem to feel part of their winning should now be turned into cash. It helps explain the weakness in crypto, too. There is massive ownership overlap with disruptive tech and FAANMG stocks. Losses in one create risk reduction across the board. Bitcoin is trading like the QQQ and nothing like gold. What is the bull case, tactically? Many risks are now in prices, tape getting oversold (though not quite at "fat pitch" extremes we saw in December 2018 or March 2020), Treasury yields are relaxing a bit on risk-off/growth scare, buybacks should come on strong, the real economy is still in OK shape (mirror image of 2020 when stocks ripped as the economy reeled). Whether the consumer price index supports or refutes the "peak inflation" theme could be important. Credit markets are registering more worry, and high-yield CDS are pricing in tougher times. Again, not at punishing levels or hinting of systemic danger, but way less supportive of stocks. Cash bonds doing better, corporate yields now near 4.5% as a group not terrible to rebalance into, perhaps. Breadth, as noted, is brutal. We have 1,400 new 52-week lows on the Nasdaq, a bloodbath. Eventually these stats become "so bad they're good," maybe not quite yet. VIX at 34, slowly building in more concern but not rushing higher because the Street is pretty hedged, and the decline has been fairly orderly. Do we need a better burst of fear to flare off the selling in a quick stroke?
A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, May 5, 2022.
Brendan McDermid | Reuters
This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics.
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