The S&P 500 and the DJIA are holding on to solid gains but it is one of those days where the indices don't do a good job of reflecting what is really going on. Small caps are lagging badly. The Russell 2000 ETF is down 0.8% and has given up even more from the opening print. There are more than twice as many stocks that are down than up and breadth is now negative after a strong, positive start. To put it in simpler terms, the market action has deteriorated badly since the open.
I mentioned last week that holding up the indices into the end of the quarter might setup conditions for a reversal this week. News about the deal with Canada caught the bears leaning the wrong way and produced a gap up open and there are also automatic inflows into 401Ks and other accounts. However, those two factors will wear off quickly and then we will have to deal with the negative seasonality of early October.
One issue I'm not hearing much talk about is that bonds are back to last week's low. The 20+ Year Treasury Bond Fund ETF (TLT) is on the verge of its lowest close since May. There is some key support in this area and if it is breached it is going to be very meaningful for bonds. Lisa Abramowicz of Bloomberg noted that Blackrock's $9.2 billion ultra-long US Treasury ETF just suffered its biggest one-day redemption since 2014.
We need to keep an eye on bonds here. If TLT moves below $116 it will be very significant technical breakdown.
I've not been doing too much trading today but have been a net seller overall. My Stock of the Week, New Age Beverages (NBEV) , is one bright spot but a number of biotechnology names are struggling and the pockets of strength are extremely narrow.
Many money managers just booked a good quarter and there may be some inclination to stand aside and wait for some better entries to develop. I know that is what I'm doing.