Don’t panic. We knew this was coming.
Despite Barclays saying just this week (Monday in fact) that the S&P had legs, investors are reconsidering a number of things, not the least of it being valuation and the fact that the Trump administration cannot get the horse out of the gate.
On Wednesday, John Schlitz, chief market strategist for Chaikin Analytics, said more selling is to come. Chaikin’s proprietary investing platform has been bullish on the S&P 500 for the past few days.
“The market’s ability to eclipse the recent highs was probably going to depend on the financial sector,” Schlitz writes in a report to clients today. “The financial sector’s inability to extend the gap-up opening that occurred immediately following President Trump’s address to congress, when coupled with the failure of the bank index to make any net headway in the first-half of March despite yields jumping 20 bips, had put the burden squarely on the bank Bulls to make something happen.”
They failed.
And here we stand.
Bank indexes fell 0.7% the day the Fed raised rates – after a weak rebound the following day – declined again on Friday and Monday. That brought the bank index (Unfortunately, we could not get stock quote BKX this time.) right to 50-day moving average support and down 10 points from its March 1 high. In technical terms, that move became a fairly important line in the sand for traders who move the markets on us when we least expect it. That line was “breached aggressively yesterday, with both the large and regional bank indexes (KBE 43,10 +0,05 +0,12%)(KRE 45,83 +0,08 +0,17%) staging their biggest declines since Brexit,” Schlitz says. Both are underperforming the S&P 500 again today.
Big sell-offs like yesterday’s tend to stabilize for a day or three and then test the downside again. If that’s the way it plays out this time around, then the S&P 500 could hit 2326 later this week, or early next week, according to Chaikin Analytics. It’s currently 2340.