In my opening column this morning, I discussed how the unwinding of the short volatility trade has been causing instability in the indices. That will continue to reverberate, but the primary issue impacting the market this morning is that of further increases in bond yields.
The market has shrugged off a number of interest rate scares in the years since the Great Recession, but the bears have always believed that they would be the catalyst that finally produced a major market pullback. They have been wrong with their timing for years, but now that view is finally gaining some traction.
Maybe this time they are right. We have little choice but to watch the price action for signs that interest rates are now the main driving force. The unwinding of the short volatility trade is giving the bears some room to prove their point, and we need to keep a close watch on retests of recent lows.
Despite the lackluster indices, stocks in general aren't acting that bad. Breadth is running about 2600 gainers to 3700 decliners, and there are only 39 new 12-month highs, but one of them is Twitter (TWTR) , which is helping the mood in that group.
I'm seeing quite a bit of drifting and not much I'm interested in buying right now. Recent Stock of the Week, Iovance IOVA is still running, and Sangamo SGMO is showing some of the same characteristics.
Individual stocks look better than the indices, but that doesn't mean they are going to buck the trend. Make sure you are using stops, and honor them.