The chatter is pretty bearish, isn't it? All those scary statistics telling us how the week after September options expiration (this coming week!) is often down. It's almost as well known as the Santa Claus Rally, but maybe they just haven't come up with a catchy name for it yet.
And if you are not into seasonality (I am not) then you can be scared by the UAW strike. Or the move in interest rates. Or the move in the U.S. dollar. Or the move in oil. Have I missed anything?
Way back in late July/early August when folks were still feeling pretty bullish, interest rates were on the rise and folks ignored it. Also back then, the chatter was bullish on energy (after having been bearish in June) while at the same time folks were discussing how inflation had peaked or was decelerating. At the time I even queried how can you think oil is going up but inflation going down?
Well, here we are, nearly two months later and the chatter is not as bullish as it was. Interest rates are higher. Oil is much higher and inflation doesn't seem to be dying as quickly as was professed.
I am not very good at narratives on the market but isn't it possible that the 20%+ decline in General Motors (GM) in the last two months was because folks knew the strike was on the table?
Maybe the stock will collapse under $32 but it's a far cry from $40 when the strike chatter first started.
I realize everyone is using United Parcel Service (UPS) as the template for the auto stocks, but UPS was at $190, the top of the range (and filling a gap too), when they struck their deal with the unions (arrow on the chart below). And now, last week as the talks with the UAW and the auto makers broke down UPS seems to have made a possible island low. If it doesn't fill that gap back to $157 that will remain an island.
There is still a ton of resistance but the point is that it also matters where the stock or market is when the news hits. We all know the adage: It's not the news but the reaction to the news that matters.
The conundrum for the market as a whole is that it is getting oversold and while the chatter is pretty bearish and the options ratios tell us folks are loaded with puts it is highly unusual that the surveys have not shown that much bearishness.
I suppose it could be because the S&P 500 is only a few percent off the August high. Typically with the put/call ratio so high and the indicators getting so oversold the S&P would be down at least 5%, if not more.
And yet with all that bearish chatter we can't seem to get a good whoosh in the market. We can't even get another visit to the August low. If we can get a push down early this week I'd have to think we rally in the latter part of the week.
