[Chart courtesy of MarketWatch.com]
- Moving the markets
Volatility continued today although not much was visible during the regular session. ZH remarked:
Having been up almost 400 points from its Friday cash close, Dow futures plunged back into the red, amid chaotic swings and the lowest market liquidity ever seen. But that did not last as the machines dragged stocks back up – The Dow up over 500 points to a 50% retrace of its Volocaust losses… before running out of steam…
In other words, we are still in the middle of chaotic conditions where anything can happen as witnessed by the “Fear-and-Greed” index whose needle remains stuck at “Extreme Fear.” It will take a little time to evaluate if the VIX is just taking a break to come back with a vengeance or if today’s upside follow through signals an end to the correction.
Markets headed higher supported by declining bond yields and a weaker dollar. The execution of our trailing sell stops last Friday affected about 55% of our ETF holdings, and we are participating in the current rally with the remaining 45%. I will increase those percentages as soon as I see some calmness return to the markets, which also likely means that bond yields will need to stop rising.
That was not the case today as the 10-year rose 3 basis points to 2.86% with inflation worries being on the forefront. In that regard, traders are eagerly awaiting Wednesday’s Consumer Price Index (for January), which is critical, as a higher than expected number will represent further inflationary tendencies, followed by higher interest rates and potentially a bearish effect on equities.