After a couple of emotional days of trading in front of the election, the market looks hungover Wednesday morning. The failure of the Republican "red wave" to develop has cooled off the positive momentum that was building, but the fact that there is still likely to be gridlock in Congress is preventing a more severe selloff.
There is also the continued issue of chaos in the cryptocurrency sector.
There are rumors that the bailout of FTX by Binance is unlikely to proceed once Binance reviews the books. This is just a market rumor, but it is pushing cryptocurrencies even lower. Bitcoin has plunged to around $17,000 and is struggling to find support.
The problems in the crypto sector don't directly impact equities that much and may actually help some sectors such as precious metals. However, it helps to destroy the appetite for speculative risk. If someone can go from a net worth of over $15 billion to less than $1 billion overnight, then maybe it is a good idea not to take on risky trades, even in equities right now.
One of the things that bothers me most about the market action right now is that we are in the midst of small-cap earnings season, and there are brutal selloffs in some of these stocks. Upstart (UPST) and Lucid (LCID) are good examples. Both names have already been pounded down from their highs, but now they are hitting new multi-year lows. These types of stocks are relatively lower profile and may not see as much coverage, but there are quite a few of them that look terrible, including Zoom Video (ZM) , Marvell Technology (MRVL) , Splunk (SPLK) , CrowdStrike (CRWD) , DocuSign (DOCU) , etc.
We also have the CPI report Thursday, and market players have been burned on that news several times this year. The appetite for betting on a favorable CPI number is pretty limited.
We may see some sort of intraday bounce as things are quite negative right now, but volatility will remain high, and plenty of folks will be sitting on the sidelines for CPI.
