The Stock Market Is Falling Again

This morning, things were pretty quiet in the stock market.

There were no economic data releases, no notable earnings — not much going on in general.

In the last hour or so, though, the market has taken a turn lower, and now the S&P 500 is down 0.3% on the day, trading right at 1650. The Treasury market is also selling off — the yield on the 10-year note is 6 basis points higher from Friday’s close, trading at 2.88%.

If these levels hold and the index closes in the red, it will be the ninth trading session of the last eleven in which the index has fallen.

In a note to clients Friday, BofA Merrill Lynch technical research analyst Stephen Suttmeier warned that the sell-off that has taken hold of the market over the past two weeks may not be over yet.

Reflecting on Thursday’s trading — the worst session in the recent spate of selling — Suttmeier wrote:

Yesterday’s 1.43% drop in the S&P 500 completed a 1-month top, but market complacency suggests deeper downside risk. Sellers may not be exhausted yet and the following four indicators point to complacency in the US equity market:

  1. NYSE consolidated tape volume of 3.4b shares was slightly above the 65-day average and not at panic volume levels.
  2. The market drop did not qualify as a 90% down day, with 85.4% of stocks down and 74.4% down volume. This is not panic downside volume and breadth.
  3. The daily ARMS (TRIN) was complacent at 0.55. A daily ARMS reading above 2.0 would indicate near-term fear. In fact, readings above 2.0 on June 19, April 17 and February 20 and all were near tradable bottoms.
  4. The 5-day put/call ratio is also complacent and reached the lowest level since mid-September 2012.

The chart below shows today’s trading session to the right of the light blue shaded area.

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