When it comes to the continuing claims weekly numbers and non-farm payroll report, I believe most investors have thrown their hands in the air like an exhausted parent of a misbehaving child and said, "Well, what are you going to do?"
We know the numbers will be huge. How huge? Guesses are all over the place and few people have a clue. And we can see what are you going to about it reaction taking hold in the futures. The reports are nudging numbers, but given the level of the Volatility Index along with a general prior day big move, pushing the S&P 500 futures 0.5% or even 1% isn't what it used to be. Compared to the VIX, it's a major underreaction.
Stocks not selling off initially on bad economic news is generally viewed as a positive, but I see the lack of reaction more in the vane of exhaustion. We want different news or different catalysts to trade. That's why the Trump oil tweet mattered so much yesterday. One, oil had been beaten down and likely acted as the real catalyst for the market lows in March. Two, oil and energy still have influential positions within indexes. Three, the sector was so oversold, it was primed for a quick squeeze, which helped the general psychology of buyers enough to chase some other names.
And despite the pop on Thursday, we're seeing challenges to continued upside. Energy began Friday strong, but has faded. Small caps can't find buyers to save their souls at the moment. The obvious worry here is small companies will vanish from the landscape quicker than their larger counterparts the longer the economic slowdown continues. For some businesses, it is an economic halt.
And don't get me started on banks. There is no help coming from this sector. Tech, which had been doing a lot of the heavy lifting, is starting to get dragged by the overall weight of the market. I still look to this sector to lead us back higher.
The positive vibes created by the last week in March are fading. Chatter will surely center upon a retest of the lows. That's the popular line of thought. I lean more towards either 2% lower, then another bounce, or we make new lows rather than simply retesting the old ones.
Mondays over the past six weeks have not been very forgiving. This week, we broke a nasty Monday trend of brutal opens to the trading week. I'm not excited about holding into the weekend. My trading account is currently 100% cash. I took one shot at a bounce trade on small caps today and was stopped for a loss within 20 minutes. No loss is a fun, but I'll call it a good loss since the index has continued to trend lower.
One last potential positive here is the VIX down slightly even as the market is lower. The problem is we need a VIX at 30 or below. Unfortunately, we can't even break 50, let alone 40, for any extended period.
Next week should give us a dip-buying opportunity, but I'm keeping with the approach of high cash levels and selling big bounces rather than adding to strong moves higher. It's the only thing I've found working.