The State of the Markets:
One of my favorite jokes about Wall Street goes something like this: The first time something happens on Wall Street, it's called it a trend. If it happens twice in a row, it's a tradition. And if it happens three times in a row, well, it's darned near a commandment!
I guess it is good news then that stocks managed to close higher for a second consecutive session on Monday. It is also good news that stocks appear to be in "bounce" mode - aka phase two of the crash playbook. And on that score, technicians are saying it is good news that the S&P bounced off its 200-day moving average on Friday and as such, the low of the move is "in."
Given (a) the extent of the decline and (b) the dearth of any news or real fundamental support for the big dive, this argument would seem to have some merit. While Ms. Market can and often does do anything she darn well pleases, it was kind of difficult to justify a 12% decline from top to bottom based on the idea that rates and inflation might rise a little faster than expected.
Therefore, one can easily argue that the successful tests of the 200-day on an intraday basis and the 150-day on a closing basis means that it's time to go the other way for a while.
Speaking of bouncing at key technical levels, it was reported that Friday's timely reversal may have been aided by a report from an influential quant over at JPMorgan. Known as "Gandalf" the analyst suggested the selling attributed to volatility trading and strategies involving volatility targeting (such as risk parity and the like), had run its course. As such, traders had the ...