In the Desert, the Mighty Desert, the Market Sinks Tonight

Stocks held up well today–until they didn’t–and the S&P 500 sunk for the second day in a row.

AFP

The S&P 500 fell 0.6% to 1,949.98, its biggest drop since June 12, while the Dow Jones Industrial Average declined 0.7% to 16,818.13, its largest tumble since May 20. The Nasdaq Composite dropped just 0.4% ti 4,350.36, while the small-company Russell 2000 slid 1% to 1,173.24.

Why did socks have that sinking feeling? It wasn’t because of the economic data, which showed new home sales picking up–the monthly rise was the largest since 1992–and consumer confidence rising. So let’s blame what’s happening in Iraq, where Syria bombed the western part of the country. That’s called escalation.

Or don’t. Westpac’s Graeme Jarvis explains why:

Nights like last night make so much sense to me. The make sense for what they did do more than for what they did not do. Just before 3am [Westpac is an Australian Bank. Ed.] the WSJ ran a headline that Syrian planes had hit targets in Iraq. That is nominally the reason you will read this morning as to why US yields are so much lower this morning. It makes sense on chart as well. Bonds went bid (yields fell) as that headline was digested.

What I think is more interesting-er is what yields were doing prior to that news. That is for me the key takeaway from last night. For days upon days I have been berating youse blokes with my narrative that I think yields are too high. It was based on positioning. It was based on sentiment. It was based on one-sided forecasting. So why I think the better move happened before 3am is that we received a clump of US data that said everything is awesome and yet yields could push no higher…

Stepping back and looking at the Dow, the S&P500, the NASDAQ and the Russell 2000 and technically they all look like they have traced out some sort of a topping pattern. Highs or news highs were seen across all indices that failed to hold. Markets then traded lower into the close. Just as the bears looking to take yields higher in the bond pits failed so too did the bulls in equity markets. This is trading minutia that makes sense to me. This is why I like what I saw last night. I saw across the board failure. The view may very well be wrong but right here right now this trading detail makes so much more sense to me than casting the night away simply because of a 3am WSJ headline.

Even failure seems more interesting than the do-nothing market we’ve had this week.