1. Moving the markets

Another day, another roller coaster ride. Sharp early losses were wiped out, as the markets did a U-turn with the major indexes ending moderately in the green. One of our more volatile SmallCap holdings had triggered its trailing sell stop last night and was sold.

Fed head Powell contributed to the early sell-off with these comments:

Fed Chairman Jerome Powell said the economy has recovered more quickly than expected thanks largely to stimulus and vaccines.

That will allow the central bank at some point to roll back some of its help, though he said that will happen “very gradually … and with great transparency.”

That spooked equities, which already had given a new definition to the rollercoaster name, but in the end the markets managed to crawl back out of that early hole with airlines and cruise line operators leading the rebound.

In economic news, Initial Jobless Claims fell below the 700k (to 684k) marker for the first time since the start of the pandemic. This was offset by news that the total number of Americans claiming some form of unemployment disappointingly rose last week, back above 19 million, according to ZH.

The US Dollar continued its rebound thereby taking the starch out of gold’s early leap and pulling the precious metal back into the red. Bond yields bobbed around their unchanged lines with the 10-year ending slightly higher, but the move was too small to have any effect on the markets.

I expect this type of volatility to continue and quarter-ending rebalancing to come into play for the remainder of this month.

1. Moving the markets

After yesterday’s broad retreat, the Nasdaq managed an early bounce, which was quickly wiped out when the index changed direction and headed south while accelerating its demise for the day during the last hour.

SmallCaps had a wild and whacky day as well. Up strongly in the morning, the momentum faded with “value” and “growth” surrendering their early gains, but “growth” fared far worse than “value.”

In the end, the major indexes could not hold on to early advances and succumbed to the bears with the Dow holding up the best by ending essentially unchanged. While it seems that the markets continued to rotate out of high-flying growth names, it was disappointing to see that “value” ETFs were not able to hang on to their early boost.

Bond yields continued to the slip for the third straight day, but strangely enough that did not prevent or mitigate the sell-off. The 10-year yield dropped to 1.64% after having made a 14-month high last week.

The US Dollar Index resumed its rebound despite lower interest rates and scored 2-week highs. To make this even more confusing, gold rallied in unison with the Dollar. Huh?

ZH explained the choppiness in the Bloomberg’s chart noting that the Central Bank Balance sheets have stagnated:

Time to activate up the printing presses, or this market will continue to go nowhere.

1. Moving the markets

An early attempt by the major indexes to cling to their respective unchanged lines proved to be a futile one, when mid-day the bears stormed out of hibernation. All equities were slammed, and a sea of red was the inevitable result.

Even slipping bond yields could not stem the tide, but at least the 20-year Bond ETF (TLT) finally managed a green close after having endured a serious slapping for most of this year (-13.61%).

One of the reasons for this equity weakness was the sudden scare of a third pandemic wave, which may impact the population in terms of medical vulnerability. Not helping matters was the realization that the much-touted global economic recovery may find itself between a rock and a hard place.

Added CNBC:

The World Health Organization said most regions of the globe are seeing an increase in new Covid cases as highly contagious variants continue to spread. Germany is extending its lockdown until April 18, while nearly a third of France entered a month-long shutdown on Saturday. Oil prices fell more than 6% amid the threat of a third wave of global infections.

To me, it seems that the bullish theme has fumbled somewhat over the past week, despite the Fed’s reckless money printing efforts during which $100 billion were created.

Today, there was simply no place to hide, as growth-, value- and SmallCap sectors were all pulled out of the barn for a severe spanking. For sure, some new driving force is needed to pull equities out of the doldrums.

Hmm, I wonder what that could be given that even today’s joint jawboning session between Fed head Powell and Treasury Secretary Yellen did nothing but accelerate downside momentum. Ouch!

1. Moving the markets

After getting pulled off its lofty level last week, the tech sector showed signs of life and built on Friday’s modest rebound by gaining +1.23% for the day. While all three major indexes ended in the green, today’s rotation was from “value” into “big-tech growth,” thereby leaving SmallCaps in the dust.

ZH equated it to a “panic rotation,” as this graph shows, apparently caused by a modest drop in bond yields, making this look like more of a relief really and not necessarily the beginning of a new trend.

However, when looking at this Nasdaq 100/Russell 2000 chart, it becomes clear that we have reach a resistance level, which means the Nasdaq could plunge again with SmallCaps subsequently benefiting.

One of my client’s observation this morning, that we appear to be in a meat grinder, is spot on, as an encouraging trend in one asset class ran out of steam with another one picking up the baton, but only on a short-term basis.

The 10-year bond yield dropped back below the 1.7% level helping equities to a green close, but the late USA Dollar dump, after an early pump, did nothing to support gold with GLD giving back a scant -0.15%.