The headlines in the business press will note that the market fell sharply today and the DJIA was down over 500 points before a late bounce, but it was an odd brew of action.
Banks suffered the brunt of the injury with the SPDR Select Financial ETF (XLF) down 3.4%. The Russell 2000 ETF (IWM) held up very well and only lost 0.12%. FANG names also showed good relative strength compared to the DJIA and the S&P 500
Breadth ended up around 2-to-1 negative but there were some decent pockets of positive action. I added shares of Twitter (TWTR) , Momo (MOMO) and IQIYI (IQ) today. All three stocks ignored the intraday pressure.
Most of our recent selloffs have been produced by Donald Trump and decisions about trade that the market never seems to worry about for long. The selloff today was due to the political situation in Italy which is having a profound impact on bonds. There is no easy 'fix' for the situation and the market seemed rather confused about it. It isn't like a trade decision by Trump which is likely to be modified in a matter of a day or so.
The big issue now is whether this Italian bond issue is going to generate further selling pressure. The late bounce was a hopeful sign and the fact that certain areas of the market were unscathed was a positive, but this is a very uncertain situation and there was some obvious technical damage done to the senior indices.
If the action in individual stocks had been worse I'd be much more concerned about this market.
There are definitely some good reasons for increased caution, but this wasn't the disaster that the Dow seemed to indicate.
Have a good evening. I'll see you tomorrow.