The market's pre-election rally was interrupted on Tuesday as wild volatility in the cryptocurrency space briefly spilled over into stocks and caused a sharp intraday dip. The indexes recovered most of the setback by the close, but it created some very messy intraday action.
Cryptocurrencies suffered some panic selling on the news of woes for one of the largest crypto exchanges, FTX, and what appears an emergency takeover by a competitor. That hurt bitcoin and stocks like Robinhood (HOOD) and Coinbase (COIN) .
At the close, breadth was five-to-three gainers, and the Dow Jones led with a gain of around 1.1%. Small caps lagged and finished the day slightly red. There were quite a few 10% movers, but new 12-month lows expanded to around 350 names due in part to the negative crypto sympathy.
Charts continue to develop very nicely, but we are running into the election news on Wednesday morning and then the consumer price index report on Thursday morning. We are very likely to see elevated volatility. The market focus will shift quickly from politics and back to economic matters, and the economic picture isn't all that attractive.
There were fairly big moves Tuesday in the dollar and oil due mainly to speculation about the potential for China to reopen its economy. If that does occur, we should see stronger moves in those two areas.
We already have some drama about vote counting in Pennsylvania and Arizona, which could be problems if they prevent a clear winner in some races. The market has already priced in a Republican victory to a great extent, so the risk of some surprises is relatively high.
Have a good evening. I'll see you tomorrow.