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“Conquering the world on horseback is easy; it is dismounting and governing that is hard.” – Genghis Khan

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Futures are down. What else is new? This morning we have China to thank as troubled property developer Evergrande filed for Chapter 15 bankruptcy.  In spite of the news, the yuan is actually rallying a little bit on reports that the PBoC has instructed banks in the country to support the currency. There’s no economic data on the calendar today, so there won’t be much to drive markets between now and the opening bell.  It’s hard to imagine what kind of catalyst could turn things around heading into the weekend, but how we do end up trading between now and the closing bell will give a good read on where sentiment really stands.

If you’re looking for an example of the manic nature of the market, look no further than the last 26 trading days.  The chart below shows the net daily breadth readings of the S&P 500 since July 13th.  Closing out July, bulls took charge of the market as there were just two days of negative breadth in the last thirteen trading days of the month.  After ‘conquering’ the market, bulls quickly found that maintaining control would be a lot harder, and in the first thirteen trading days of August, breadth has been turned completely upside down with just two days of positive breadth.

Besides being an unlucky number, thirteen is a somewhat arbitrary number when analyzing the market, but we did find it interesting that the two days of positive breadth in the market over the last thirteen trading days is the fewest amount of positive days in a thirteen day window since late September 2022, and the 11 positive days in the thirteen day window that preceded it was the strongest since March 2013.  In this market, investors are either all in or all out.

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