Stocks are trading just 1% below their all time high, yet judging by today's open there was sheer capitulation panic.
There is a reason for that: as noted last week, the market breadth has been collapsing similar to what we observed last summer when a handful of market "generals" did all the heavy lifting. Well, as Bloomberg's Ye Xie shows market breadth has only gone from bad to abysmal, with the number of S&P stocks above their 50DMA at just about 50%, a very tiny increase from the 47% on June 29 when the S&P hit its first of many consecutive all time highs.
Putting these numbers in context, Xie writes that "over the past three decades, there were only two periods when we saw this negative divergence (record stocks with breadth below 50): in 1998 and 1999." Of note, the latter print took place just before the dot com bubble burst.
And so, as traders woke up today to see everything melting down with those of a certain vintage recalling what happened in early 2000, they dumped their winners first which in turn dragged everything else lower; the result was the 4th worst open in market history as measured by the NYSE TICK (which measures buying/positive vs selling/negative ticks, i.e., program buying and selling).
As shown below, today's TICK print of -2,006 at the open was just barely worse than the record negative TICK hit on May 11, 2021 which was followed by a mini correction. The other two top TICK prints were -2,058 on June 11, 2020 and -2,030 on Oct 27, 1997.
As Bloomberg's Kriti Gupta adds, "based on futures trading, today's open resembled the bloody open of Oct. 28 of last year when the S&P 500 opened down 1.42% during a particularly volatile time ahead of the U.S. Presidential election. That was also a period when Covid cases on both sides of the Atlantic were accelerating and the vaccine announcement still hadn’t happened. That day ended up being the worst stock rout in four months."
So far, the rout appears to have stabilized, but as noted earlier, if we lose 4,300 the negative gamma kicks in. Next, if we lose 4,250 then all bets are off.