An auction of 10-year paper later will offer more clues about appetite for U.S. Treasurys, as some have begun to consider a possible emergency rate cut from the Fed.
As for stocks, some, like our call of the day from Revere Asset Management portfolio manager Connor Bates, say stocks are poised for a bounce. He says a “short-covering rally in the coming sessions” is likely.
“Traders are scared to hold positions overnight, and frustration with the market is widespread. Most people, especially those who’ve been burned recently, have little to no interest in getting involved right now,” Bates said in a string of posts on X.
“I’ve never seen all my secondary breadth indicators this oversold — ever,” he writes, in reference to technical tools that help traders confirm market trends. Breadth refers to the number of stocks advancing versus declining.
One of his charts indicates 2022 lows have been reached across several moving averages for S&P 500 constituents.
The portfolio manager also flags extreme fear in the market, and the CBOE’s total put/call ratio, which is hovering at 1.22 and high enough to indicate an overly bearish market that could bounce.
“It’s still a highly volatile market, but at this point, I believe the pain trade is to the upside,” as he forecast “a multiday snapback rally,” Bates said.
“Monday’s lows are a critical line in the sand — if these levels are convincingly broken, the probabilities for a bounce decrease significantly. However, keep an eye out for an undercut and reclaim scenario,” he said, referring to, for example, the S&P 500 dropping below a key support level, then quickly bouncing back above it.
The S&P 500
hit a low of 4,835 on Monday.
He’s not alone with the rebound call. Raoul Pal, co-founder and CEO of Real Vision financial media company, posted on X that the current market “feels a lot like Dec. 2018.” Stocks had endured weeks of selling and a brutal Christmas Eve, but in January 2019, Fed Chair Jerome Powell signaled a dovish pivot and equities rallied.
