With the market poised to further exhibit its newfound surliness in the week ahead, the following points remain relevant as the week progresses:
- Post option expiration, there are always some adjustments to be made. Counter-trend rallies should be greeted with skepticism during the first part of the week.
- The SOX continues to look like a dumpster fire. Until we see some traction there, the markets aren't going anywhere.
- Financial names look worse than the SOX in that they seem to have lost the will to put together ANY volatility whatsoever. The sector looks rather morose to be frank.
- A positive aspect to the current decline is that it has obliterated the long end of rates. This acts as an ease in overall liquidity to the market and creates a very real, attractive valuation gap between rates and equities. In other words, equities are cheap here with rates so low.
- Another positive aspect is that sentiment is quickly turning bearish. While this doesn't guarantee a turnaround, barring an absolute fundamental debacle in the weeks/months ahead, it should slow down the descent somewhat.
In the end, it seems that choppy is the tune to sing. Rallies should be sold or used to lighten exposure.
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