The second reason is a lack of positive catalysts today. There are no economic reports out today, and no real corporate news either in the form of earnings reports. Alcoa kicks off earnings season tonight.
The last reason is simply profit taking. People forget that we just came off a huge rally in the market. In the last 2 weeks, the SPX bottomed at 1258 and rallied all the way back to 1356. That's more than a +7.5% move in a very short time span. That's also a rally that our readers were prepared for after I wrote several pieces on how bearish sentiment had again reached extreme levels that usually lead to a trading rally.
The flight to safety trade is back on today, with strength in the dollar, gold, and Treasuries. The dollar is strong mostly against the euro, which is weak for obvious reasons. The strong dollar is weighing on most commodities. Oil prices are down to $95.40, but gold prices are higher near $1556.
The 10-year yield has fallen back to 2.94% as Treasury bonds rally in price. And the VIX is surging +18% right now, retaking its 50-day average and reaching the 18.75 level.
Trading comment: If you put money to work into the mid-June pullback, when bearish sentiment was spiking, then it is normal to be taking some profits now and raising a little cash again. I don't think the rally is over after just 2 weeks, but right now the headlines are giving the bears enough cover to shoot against everything. The debt ceiling issue is also a big negative, but only to sentiment. It's not going to hurt Q2 earnings that we are about to get. But if they can get a deal done, we could see a relief rally.
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