U.S. Stock Market – Resilient Bull !

Most major U.S. stock market averages rebounded nicely in afternoon trade today following fairly sharp losses of nearly 1.00% across-the-board in the morning.. A decision by the Bank of England to “stand pat” with interest rates (rather than easing as anticipated) contributed to a 1.06% decline in the UK’s FTSE 100 Index, which weighed on U.S. stock prices in morning NY dealings. ECB President Mario Draghi also commented that there are still downside risks to the Eurozone economy. Not sure this was as important as the UK’s interest rate decision, but Draghi’s comments were certainly not reassuring. However, U.S. buyers returned in NY afternoon trade and most major indices ended today with only minor loses.

Here are today’s closing marks for four major indices, with changes from the previous close:

Dow Jones Industrial Average              13,944.05        -42.47              -0.30%

S&P 500 Index                                      1,509.39        -  2.73              -0.18%

NASDAQ Composite Index                   3,165.13        -  3.34              -0.11%

Russell 2000 Index                                    908.10        -  3.19              -0.35%

Quite frankly, given my bearish view, I couldn’t have asked for a better NY opening. Most major indices opened higher and then immediately succumbed to fairly heavy selling pressure. By late morning, with the S&P 500 down about 1.00% on the day, I was feeling confident that a sell signal would finally be triggered within my computer-based trading system. However, selling was quickly contained, buyers returned, and most major indices ended the day with only minor losses. A 15-point rebound in Apple’s stock (+3%) in the last 20 minutes probably provided some support to the overall market. Apple’s management responded to a lawsuit from activist hedge fund manager David Einhorn with friendly talk about the Company’s cash hoard of $137 billion. Not sure this matters all that much in the grand scheme of things, but there was clearly a dearth of selling pressure within the overall market in the last 20 minutes when Apple was surging.

Bottom Line: What golden nuggets can I offer today? You’ve heard 5 days in a row of bearish commentary from me, but the S&P 500 Index is down less than 4 points (-0.25%) this week so far, and every sell-off has been contained. I am still negative and I expect the next major move in the U.S. Stock Market to be to the downside. For your review, I have attached the daily chart of the High Yield Corporate Bond ETF. This popular ETF product is now down 9 of the last 10 days for a total loss of 2.0% for this period. Yield spreads are clearly widening between ultra-safe Treasury securities and riskier corporate bonds. I see this as a negative omen for the overall U.S. Stock market. Widening spreads can be interpreted as a loss of investor  confidence and may foreshadow a general liquidation of risk assets (i.e. stocks).

High Yield Corporate Bond ETF (down 9 of the last 10 trading days)