It was an interesting day of news with the surprise acquisition of Whole Foods (WFM) by Amazon (AMZN) , and it caused some fast trading in retail stocks like Costco (COST) and Walmart (WMT) , in consumer staples like Kraft Heinz (KHC) and Post (POST) and in a few other plays like Impinj (PI) .
Without that drama, it likely would have been a very sleepy summer Friday. Although we did have a bump in volume due to quadruple witching, most of the market was very quiet. Breadth ended up slightly negative at around 3,100 to 3,500 and the major indices all finished in the red.
There was plenty of political and economic news this week, but the main thing that impacted the market was the announcement by Fed Chair Janet Yellen that the Federal Reserve is looking to "normalize" its balance sheet starting later this year. The bears have long anticipated that a more hawkish Fed and the unwinding of its $4 trillion balance sheet would be the main catalyst for a correction. They have been wrong so far, but the reaction this week indicated it is not a totally unrealistic prediction.
Overall, the market has not cared about news flow, especially anything related to Donald Trump, which means we have to stay focused on price action. There are a number of issues with the price action, although the indices are still only slightly off their all-time highs.
In additional to the weakness in the FAANG names, one area I am watching closely is the number of stocks hitting all-time highs vs. all-time lows. If you just look at the indices, you would assume there are many more all-time highs, but that is not the case. On Thursday, there were actually more new lows. That tells us there isn't much upside momentum at all. There are a few things that are moving, but not much. Strong markets have some pockets of leadership, and this has little.
We are in a poor time of the year seasonally, and with the Fed out of the way and no notable earnings reports for a while, the news catalysts are limited. I'd taken a more bearish posture this week and will look at being more aggressively bearish should the market continue to struggle.
Have a great weekend. I'll see you on Monday.
