While nobody raises a flag to when a correction is to begin, we recently were hit by a wave of selling so intense that I had to look back historically for some game changing trends. Let’s start off talking about the breadth, which was a rare 95% negative bias, and volume was also tipped to the 90% side. These were in concert all day long, which is why the TRIN was ‘only’ up to 1.70. The SPX 500 was down more than 2%, which was the first close above 1% in about two months.
Put/call ratios soared over 1.14 while other metrics tilted heavily bearish.
The VIX skyrocketed as players reached for protection as if it were the end of the world. We’ve seen this behavior often, but more recently selloffs have been limited in scope and dip buyers were active participants. It seems they were still on extended vacation. The markets lost two months’ worth of gains in just one session!
But what startled me all day was the TICK, which had some extreme negative readings right out of the gate. This was a sign the selling would be intense, and while we didn’t seen a full-fledged pasting of individual stocks, it was certainly looking like a sea of red by the closing bell.
Was this the ‘big one’ everyone has been waiting for? I thought that was considered around Brexit, which proved to be short-lived. The narrative from the Fed about potential rate hikes sooner rather and the N Korean missile test seemed to hit the markets like a 1-2 punch to the face, hence it never had a chance. We’ll see if the mood gets any better next week after the Fed meeting is finished.
