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“Man is the only creature who refuses to be what he is.” – Albert Camus

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And on the seventh day, the market rested.  After six straight days of the rally looks like it’s taking a day off as equities, crude oil, gold, bitcoin, and even treasury yields are lower.  Some of the concerns this morning can be tied to comments made by Minneapolis Fed President Kashkari who said he cannot rule out further rate hikes. On the economic calendar, it’s another light session this morning as will be the case most of the week even as the quantity of earnings reports remains very busy.

Over in Europe, the major indices are all down between 0.1% and 0.5%.  PPI for the region was down an incredible 12.4%, and what was even more incredible was that it was a smaller decline than expected!  In Germany, construction data was weaker than expected and showed the weakest level of activity since April 2020.

While momentum in the market pulled back yesterday, last week’s rally was accompanied by exceptionally strong breadth.  As an example, the S&P 500’s 5-day advance/decline (A/D) line surged to +1,476 as of Friday which ranked as the 7th highest reading dating all the way back to 1990. The chart below shows historical readings in the 5-day A/D line, and the reason it only goes back to 2008 is that before that there were no readings that ever exceeded +1,400.  That’s due in at least part to the fact that around that time is when the popularity of ETFs really started to explode creating what has become the current all-or-nothing nature of the market.

The chart below shows the performance of the S&P 500 going back to 2008 on a log scale, and the red dots show every other time that the 5-day A/D line reached +1,400 or higher.  As shown, these types of readings occurred at all different phases of the market cycle. While the late 2021 occurrence right near the market top sticks out like a big pimple, other occurrences don’t look nearly as ominous.

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