Break of last week’s lows puts January lows into focus

Monday’s weakness looked to be an important short-term negative, which could result in US Stock indices pulling back to test January lows due to heightened tariff fears. While Equities experienced an intra-day bounce on Monday, the damage looks to have been done structurally, as the pattern does not look complete. Moreover, the US dollar is also looking to push back to temporary highs, which could happen over the next two weeks. While I continue to view this consolidation in US Equities as being a temporary affair that should offer the opportunity on any test of January lows, it does happen to line up with much of the post-election year weak seasonality in Q1. The weakness into mid-February should prove to make Equities quite attractive on a risk/reward basis.  Furthermore, it’s likely that Technology should be able to stabilize this month and begin strengthening again following its recent consolidation. 

Monday’s -1.5% lower open qualified for one of the worst opening prints in recent years, and the only other instance this happened in the past two years was 8/6/24.   A few happened around the time of the March 2020 pandemic but failed to occur even during the Global Financial crisis of 2007-2009.   Data compiled by Bloomberg shows that between the end of 2006 and the end of 2019, the worst opening print was –1.4%, which was beaten on today’s open.

While the market did rally intra-day on reports that Mexico’s compliance in sending 10,000 troops to the border would delay tariffs by a month, market breadth still finished at greater than 2/1 negative.

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