Friday's session started and ended on a tepid tone with US benchmark treasury futures backing off their overnight highs going into the open while the Yen was up strongly against the major currencies. SPX ended down -20 points or -0.62% at 3215.63. The action was typical for our summer but still kind of weird. NYSE advance-decline lines and breadth opened only slightly negative even though the NQ futures were down over a percent at the cash open with the NDX gapping below and ultimately failing to regain its 20 day moving average as INTC got hammered after Thursday's post close earnings report supposedly because of the delay of its 7nm chip technology. With that the semiconductor index broke down a bit. RUT small caps are sitting back on the 200-day moving average.
NYSE breadth started at about -1:1 and gradually slid to -2:1 by just after lunch and soon we were within a few ticks of the 3190 poor low in ES which corresponds with the 3200 line of truth in the SPX cash index -- in some of the most methodical trade I've seen in a while. Sticking with that almost choreographed look, ES futures never touched the edge of the poor low of 3190 from 16 July and we bounced just above at 3191.50, thus staying above the weekly point of contention at SPX 3200. The market went out with a NYSE MOC reveal of -869M so the close was quite uneventful.
The bulls would like to see SPX stay over 3200 on Monday ahead of the week’s continued tech earnings and Wednesday's FOMC decisions and statement because to break below puts 3190 and particularly SPX 3180 in play and that is a place where market makers might have to adjust delta given current derivatives positioning – positioning that is fairly light. As mentioned on Wednesday, that is an area where we could see a fight for near term direction. Any thrust higher on lack of bad news or good news (and a continuation of the neutral market internals we saw this week) has us dealing with 3270 and 3290 obvious resistance.
After the market close on our Friday, news came down from Capitol Hill that the heads of some FAANG + companies will get a temporary reprieve and would not be taken to tasks come Monday. The hearing to question them on antitrust issues has now been scheduled for Wednesday. Goldman and probably other banks put out client notes about the vast value disparity between the tech mega-caps and the rest of the SPX recently and that news made the pages of the widely read NYT but from my reading was minimized by many who rely on a bull market for their future income.
History shows that denial is a powerful form of credit when the wages of failure are too great to officially acknowledge. When used to get to the other side of the last century's struggles, it was in the defense of strong ideals. You can buy time with happy talk but in the absence of durable measures in support of notional aspirations, even short-term traders must remember the laws of diminishing returns. Durable is the operative word there and many longer-term investors do not consider monetary policy to be sufficient. Although such pessimism leaves shorter time-frame players with a feeling of dissatisfaction and lack of conviction for the immediate term, we should be careful not to overcriticize ourselves. Trading was always difficult, and I reckon our national insobriety and the manipulation of markets for political gain is making it even harder. Don't mistake this for nihilism or fatalism --- 10 ES points can be of great consequence to some. That said, I know what it is like to be utterly exasperated when trading the multi-day time frame as a person with a point of view on the traditional meaning of the capital markets. I think we all have that in common. Even an agnostic approach to trading demands some level of underlying order.
As some suspected they would , CDC changed their guidelines for reopening schools after recent harsh criticism from the president. Amended, changed, they can call it what they like…their new statement is regarded by many medical experts here as a political message. I guess that is a matter of opinion and mine is that they have been politically compromised and that their notes about infection and transmission in school age children are purposefully incomplete and specious given the inconclusive evidence we have so far. Despite the recent study from South Korea (that only looked at symptomatic subjects), researchers here are unsure about the transmission potential of children under 10 years as of right now. Mixed messaging is still the go. I mention this here again because I think it is indicative of a broader systemic breakdown that could threaten the markets in the next hundred days or so. It transcends our borders. The battle to mitigate the human suffering caused by impacts to our economy will clash with the callous sacrifice of human life for political gain in the coming months but straight talk is the only way to defeat both the virus and that tendency for powerful entities to preserve their fortunes at any cost. The person of normal empathy might be shocked to know how well those with a will to power can sleep at night when all is said and done.
