The “Taper Tantrum” continued Thursday as stocks had their worst day of the year and worst two day period since November 2012. There is not much to say on the news front as the data had little to do with the action; this is all about a series of interconnected markets and a lot of trades unwinding due to worries about QE being reduced, and yields on Treasury debt rising. The S&P 500 fell 2.50% and the NASDAQ 2.28%. A lot of technical damage has been done in the past 24 hours.
Yesterday at 2 PM things were just fine with a potential breakout out of this descending channel happening on the major indexes - that all changed within 2 hours. After today’s gap down and constant selling a lot of serious issues now face the market from a technical standpoint. With the S&P 500 things have turned around so severely not only was the breakout reversed but the index fell to the bottom of the same channel it had just broken out of – that’s a tremendous reversal. While things are already getting quite oversold and short term bounces of sharp variety can happen from these conditions the intermediate term outlook now is troubled once more. The S&P 500 has now rescinded all of June and May’s gains, almost of all that coming in today’s session and 2 hours of yesterday’s session. The primary 1597 breakout level was also broken.
The NASDAQ has very similar issues.
Breadth on the NYSE was the worst this year and in the past few years the only such readings we have seen were in the European crisis of 2011. To put this reading in perspective there is a max value somewhere just south of -3100. Essentially 19 stocks were down for every 1 that was up or unchanged.
The NYSE McClellan Oscillator is back to very oversold readings but not to the extremes we saw a few weeks ago.
The only positive asset classes today were the U.S. dollar…
… and volatility. The VIX shot up some 23%!
Usually bonds are a safe haven in times like this but the rise in rates (and drop in bond prices) is part and parcel the cause of the selloff.
Emerging markets continue to be pummeled.
Sector analysis is moot in environments like this – we’ll show biotechnology as an example of a former leading group that was crushed.
Precious metals were destroyed…
Oil reversed its breakout…
Copper was mauled…
All in all, an “almost no place to hide” sort of day. The environment has now turned into one to preserve capital in the past day. When the market returns to health, it will be one to be given more capital to risk.