The market is up during pre-market trading with sp500 up by 0.8%, Nasdaq100 up by 1% & Dow jones up by 0.6%.
This rally in pre market due to mainly 3 reasons :
1 ) JOLTS is set to come out at 10am NYSE time, giving investors hope that good news will come out
2 ) Oil price decreased slightly today, causing investors to hope that inflation will ease
3 ) After 2 consecutive days of red, bullish investors are re-pricing the market, hence a correction to the upside. ( same concept as why when market is up consecutively for several day will lead to an eventual red day
But, don't get too exited about this rally,
1) Firstly, historically ( this year ), everytime on the day when the JOLTS data comes out, it had lead to a green day (can fact check from JOLTS date to SP500 movement). This fact alone gave traders alot of hope and fueled the speculation momentum. But this is dangerours especially now, because during the speech Powell gave at Jackson Hole and all the times during FOMC, he have repeatedly said that the job market is strong which means that a beat on JOLTS should have already been priced in and a miss in JOLTS would just mean weaker company earnings this quarter or the following quarter. With the market sentiment decreasing drastically after Jackson Hole, I dont think that market will react well to JOLTS.
2) Secondly, oil price declining should not be a big enough catalyst if not for the 'hopium' investors and traders are on for the past 2-3 months since June's bottom. This is because oil price flunctuations between the $90-$100 range have been ocuring very often for some time already.
3) Thirdly, according to a bloomberg article i read this morning titled 'Panic bottom is nowhere in sight as memory of 7th SP rout fades.'
It is summarised as firstly, the market sentiment is still considered as good now even after Jackson Hole, because the VIX is not as high as it should be, hovering at around the 26 zone when it should be at above 30. This is due to 2 complementing reasons, hedge funds switching from longto short, which mean they don't need to hedge thier non existent position, and also, bullish people are not hedging and are buying so the market is now down much.
Second point from the article is that according to Morgan Stantly & Goldman Sachs, hedge funds have been actively adding to thier short position since the week of Jackson Hole and that pension fund are preparing to sell as much as $10b worth of shares in the coming week. To put this into perpective, on the day of Jackson Hole, the market's net outflow was only $1.2billion, so $10b is alot more than $1.2b. Furthermore, quant hedge funds in general are also expected to sell $8-$15b of equities in the coming weeks alongside with rule-based funds which amount was not disclosed by bloomberg.
The reason for all these market turmoil is due to 1 quote 'is likely to require sustained period of below trend growth'
Of course, they are not going to sell all at ones on the same day or week. There will still be buying pressure from the bulls, but this amount of selling even over a sustained amount of time will add to massive downside pressure which will also cause alot more 'smaller money' to 'paper hand' and sell, especially after September's CPI & FOMC. I believe that the market sentiment will only really start to bottom after those 2 dates. But even until then, i believe that markets will still not bottom until after 8 November which is when mid-term will be happening.
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