Powell Unleashes Most Powerful Buying Frenzy Since February VIXplosion

When the Powell headlines hit the tape at exactly 12pm and traders and algos focused on just one headline, namely the so-called materialization of the "Powell Put" that we are now "just below" the neutral rate, it was immediately seen as a capitulation by the Fed chair, and confirmation that the rate hike process is approaching a pause, if not the end.

Of course, as we noted earlier, the market may have been somewhat myopic in its take of what Powell actually said, because as Amhert Pierpont's Stephen Stanley explained the markets overreacted "to what he said, perhaps partly because some of the newswire headlines don’t quite accurately convey the nuance of what he said, but that is what markets do." Indeed, that's precisely what the market did, and it did so with a force not seen since the early February VIXtermination event, when the S&P's first correction for the year was followed by a furious bottom fishing rally a few days later, on February 9.

As shown in the chart below, just after the "Powell Put" headline hit, the NYSE Uptick - Downtick index soared to 1,648. This was the highest TICK print since February 8 (and August 2011 the next highest).

Commenting on this surge in the TICK index, Bay Crest technical analyst Jonathan Krinsky notes that "extreme readings like that - amid a short-term rally like this week's - have historically been a precursor to a pullback in stocks."

Specifically Krinsky found eight prior occurrences similar to today, and they produced negative returns over the next 1, 2, 3 and 5 sessions (average loss 0.93%, 0.19%, 0.46%, 0.62%, respectively). And given that history and looming overhead resistance between 2,750 and 2,761 in the S&P 500, Krinsky concludes that "our sense is that this rally stalls out somewhere in that zone in the next day or two."

To be sure, looking at the fading TICK index since its 12pm explosion, the market already appears to be getting ready to fade the move, especially since the week's even bigger event risk - this weekend's meeting between presidents Trump and Xi - is now on deck.