Like a Bat Out of ... Wall Street

T.N.T.

'Cause I'm T.N.T., I'm dynamite

T.N.T., and I'll win the fight

T.N.T, I'm a power load

T.N.T., watch me explode

- Angus Young, Malcolm Young, Bon Scott (AC/DC), 1975

Broken?

I don't know how high we were. Edging along a cliff out in the jungle. Not higher than the canopy provided by the trees. Then again, the canopy was pretty tall and thick here. Sort of a permanent dusk. The ledge was wide enough to walk single file with gear, but not wide enough to pass. Oh, and it was high enough so that falling would be fatal. Somehow, our point man, as he led the way, ticked off a colony of bats that came out of some crevice in the disgusting, slimy rocks. It got real ugly, real fast.

These bats were screaming and they were everywhere. Down on one knee, cover the back of the neck and try to wait it out? Yeah, tried that for a few minutes. Soon enough, being the NCO in charge, I gave up on the waiting game and decided we had to push through. Otherwise, we'd be off schedule. It felt like the bats harassed us for as long as we were on that ledge, but they were just being bats and they were just doing "bat things." They wanted us gone. Nobody got bit. Nobody got scratched.

That was such a minor incident, it's truly amazing that it even sticks in my head. The point is though that for a few minutes there, I just knew, as the guy responsible, that someone was going to panic and fall off of that ledge. Hence, my call to push on. See where I'm going with this?

Another Day, More Disruption

Thursday was ugly, kids. You already know that. The bats came at us from all directions. Did you keep your cool? Did you take the time to understand, identify, adapt and overcome? Not so easy when they're everywhere. I felt some encouragement coming in on Thursday morning. The way that the S&P 500 had behaved the two days prior, at least technically, had me thinking that there could be an attempt at a rally early on... and there was.

The S&P 500 was still in the green an hour after the opening bell had chimed its last note. The Nasdaq Composite? That green on the screen only lasted for about fifteen minutes. Then "they" came at us from all directions. Bats? No. High-speed, high-frequency trading algorithms. "They" would really pour on the hatred into what some refer to as lunchtime and not let the markets up for air all day long.

The AI disruption trade was on yet again. First it was the legal craft, then software, then financial advisors. This time, while those groups remained under pressure, a little-known company, Algorhythm Holdings (RIME), which was once more well-known for karaoke than technology, announced that its logistics platform was assisting clientele scale freight volumes without what would have been in the past, as corresponding increase in operational payrolls. The U.S. S&P Trucking Index was immediately hit and suffered a 5% beating on the day. Landstar  (LSTR)  gave up 15.6% on Thursday, followed into the red by CH Robinson  (CHRW)  at -14.5%. The Dow Transports suffered a loss of 4.04% for the session.

The Pain

Then it happened. Someone fell. Soon it was more than one. Tech was back under fire. AppLovin  (APP)  was simply roasted after reporting its numbers. Apple  (AAPL) , Shopify  (SHOP) , Cisco  (CSCO)  and Palantir  (PLTR)  all took it on the chin as well. Drug Distributors were slapped around as Mckesson  (MCK)  and Cardinal Health  (CAH)  took a beating. Oh, and the banks were slapped silly as well. Citigroup  (C) , Wells Fargo  (WFC) , Bank of America  (BAC)  and JP Morgan Chase  (JPM)  were all hit with the ugly stick.

At the index level, the Nasdaq Composite backed up 2.03% while the S&P 500 gave up 1.57%. Small caps? Nope. The Russell Index lost 2.01%. As a matter of fact of all the equity indexes I follow, only the Dow Utilities closed on the green and everything else lost a minimum of 1.34%.

Didn't anything rally? Yes. Investors sought safety in the more defensive sectors of our equity markets and in U.S. treasuries. By day's end, the U.S. Ten-Year Note paid just 4.1% (-7 bps). Breadth was rather dreadful.

Broadening of the "Scare Trade"

Just three of the 11 S&P sector SPDR exchange-traded funds closed in the green on Thursday, led by the Utilities  (XLU)  as mentioned above. That said, all four defensive sectors finished in the first four slots on the daily performance tables. Defensives out-performed cyclicals and cyclicals out-performed growth.

Losers beat winners by a rough nine-to-four margin at both of New York's exchanges. Advancing volume took just a 27.3% share of composite NYSE-listed trade for the session and a 27.1% share of composite Nasdaq-listed activity. The trick was in the trading volume. Aggregate trade ramped 15.3% on a day-over-day basis across NYSE-listings and increased sharply across the membership of the S&P 500.

Those are some "Hell's Bells" type numbers there, with one exception. Aggregate trade across Nasdaq-listings actually contracted by 10.8% on a day over day basis and that was the epicenter of the pain trade. Does that negate the negative action this week from a technical perspective? Well, no, but it is better than being held up against a wall by two thugs as their buddy goes through your pockets.

Have You Ever Read Something...

... So very touching that it stopped you in your tracks? I have.

Why Are Cyclicals Under Pressure?

Don't they know that lower taxes that are in effect will include increased write-offs for capital expenditures? Perhaps AI-driven algorithms are not that smart after all. Existing home sales were weak. OK. Jobs numbers were surprisingly strong and most recent macroeconomic data-points have been strong as well. The weaker growth trade will fail. What can save markets for now? January consumer price index prints this morning at 8 a.m. ET. Pain or pleasure? One, or the other.

Crossroads​

Readers will see that the S&P 500 lost both its 21-day exponential moving average and 50-day simple moving average on Thursday, as the swing crowd broke and the pros backed off. ​

The danger on Friday will be to see if the index can maintain that contact. Lose that and that opens the door to more significant losses. The Nasdaq Composite lost that contact on Thursday, but the arguably more important Nasdaq 100 did not. Helmets, flak jackets, gas masks, two sources of water, and clean socks. When I say "move," I want everyone out on the sidewalk in 15 minutes with all of their gear. Full battle rattle. Now, move.

Economics 

(All Times Eastern)

08:30 - CPI (Jan): Expecting 0.3% m/m, Last 0.3% m/m.

08:30 - Core CPI (Jan): Expecting 0.3% m/m, Last 0.2% m/m.

08:30 - CPI (Jan): Expecting 2.5% y/y, Last 2.7% y/y.

08:30 - Core CPI (Jan): Expecting 2.5% y/y, Last 2.6% y/y.

1:00 p.m. - Baker Hughes Total Rig Count (Weekly): Last 551.

1:00 - Baker Hughes Oil Rig Count (Weekly): Last 412.

The Fed 

(All Times Eastern)

No public appearances scheduled.

Today's Earnings Highlights 

(Consensus EPS Expectations)

Before the Open:  (AAP)  (.42),  (CCJ)  (.44),  (WEN)  (.15)

At the time of publication, Guilfoyle was long PLTR, JPM equity.