This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. In a stressed, untrusting market, everything gets tested and questioned. What look like extremes in selling pressure and negative emotions are taken further just to see if things can be stretched more. The threshold for believing a bounce is "for real" is higher. It's one of those moments in which the market has grown fearful and oversold enough for some plausible relief buying but there is not yet an unequivocal "sold out" message from the technical conditions. It's tough to be a hero adding much risk ahead of the consumer price index report seen as crucial tomorrow even though it isn't the inflation gauge the Fed uses directly. The weight of the evidence tactically says the risk/reward is improving somewhat for a longer-term holder and for returns over a span of months, but the near term is a subject to more flares and scares. Can rip or tumble by 2% with no notice, just because, as short-term positioning extremes dictate the action. Monday's flush was inclusive and helpfully indiscriminate, with "safer" stocks and the upside leaders in energy also pulverized. Many jagged moves lower in stocks on no news, signs of urgent liquidation and fear of the economic-growth outlook layered on top of persistent inflation worry. Still, things such as the percentage of stocks below their 200- and five-day averages weren't quite as washed out as at prior important lows. Too many energy and defensive names have held up too well for that, so far. Best guess, we're probably not too far in time from another good bounce attempt but might come on a nasty stab lower. Noted yesterday that many eyes are on S & P 500 levels from 3,800-3,900, 2% to 5% down from here. Just a collective educated guess based on a variety of approaches from technical to fundamental to historical. So far nothing systemic has cracked (credit market anxious but functioning, etc.), but liquidity in stocks is lacking and accidents can happen. The Nasdaq 100 today breached the calendar-year 2021 low, yet another traffic cone run over by the persistent selling on the once-crowded growth favorites and hedge-fund darlings. For as much as it's felt as if software stocks have been comprehensively wiped out and energy has been ramping for months, it's worth going back three years to show this is all viewable as a massive mean-reversion swing. Excesses in either direction drained away. As for the main project of 2022 — the bleeding away of valuation premia from megacap Nasdaq stocks — progress has been made. MSFT now back into its 2018-2019 forward price-earnings range, and AAPL essentially back to where it began the pandemic. GOOGL cheaper even that at the 2018 market low. Cheaper but not yet bargain-basement, with the possible exception of ad-exposed FB and GOOGL. The S & P 500 nearing 17x earnings, not cheap but below prepandemic highs. The equal-weighted S & P (not charted) is now below 15x forward earnings, a discount to its five-year average, suggesting the heavyweights are holding up the index price-earnings now. Weakness in banks continues to give investors a sense of foreboding about other shoes to drop in the economy or credit complex. New-age lenders are being pounded ( UPST , SOFI , AFRM ) as the Street relearns that calling them fintech doesn't mean they are untethered to the credit cycle and often are exposed to weaker borrowers. Market breadth is weak but not dramatically so. A lot of new-52-week lows are piling up again, and those are the stocks the trader's handbook says you're not supposed to buy aggressively. No matter what — new lows or strong bounce — this market will need time to repair itself. The good news is that even bad years for stocks tend not to keep going straight down after a 16% drop. Seasonal patterns suggest choppiness into/through the summer. VIX remains below the recent highs, no hint of spiking to 40 for a real panic move, under 35 as the market, while twitchy, has remained slow to the flat line.
Traders on the floor of the NYSE, March 21, 2022.
This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics.