Following a very frothy new high for the indices last Friday, price action has been shifting and that continued today. Every day this week has seen some fairly significant downside action after almost none at all since we started the new year. The computer algorithms are working in both directions now and that is causing some consternation for market players that have grown used to one-sided action.
This volatility is likely to continue as the market digests a slew of news events. Amazon.com (AMZN) is trading higher on its report while Action Alerts PLUS holding Alphabet (GOOGL) and Amgen (AMGN) are trading down. Action Alerts PLUS holding Apple (AAPL) is coming up in a few minutes but what will be most important isn't the initial response to this news or even the news itself but whether market players still have a desire to pay up for stocks that have been increasingly extended. There will be analysts arguing that they are still cheap but if you are looking for prudent entry points you won't find them up here.
What will also be a big market mover tomorrow is the monthly jobs report. The market is becoming increasing concerned about bond yields which are rising fast. The 7-10 year Treasury bond Fund (IEF) is at its lowest levels since 2014 and a 'hot' jobs report tomorrow is going to cause even more concern that inflation may finally be an issue again.
The good news is that volatility is increasing. The bad news, for some, is that it moves in both directions.
We'll see what Apple brings but I am increasingly concerned that further upside for the indices will be limited. The good news has been anticipated and is largely priced in and the price action is reflecting an inclination to lock in some gains. Amazon is fading slighty from its initial push as I write and that will be something that needs to be watched.
Have a good evening. I'll see you in the morning.