Market Holds Its Own Amid the Chaos

The overall market is acting well, despite the huge bailout of Credit Suisse (CS) , the most significant financial crisis since 2008-2009, and continued weakness in the banking sector. Breadth was around 4,950 gainers to 3,100 decliners, and the Dow added around 375 points.

But we saw rotation under the surface. The big-cap technology names that were safe havens last week were laggards, while consumer staples, drugs, energy, and precious metals did well.

Small caps faded late in the day, but still managed a good gain of 1.33. The Russell 2000 contains a large number of small banks. Many of them were weak, which is why new 12-month lows hit around 390.

Many investors are scratching their heads over the market action. Bonds are acting like a recession is coming, economists are concerned about a number of factors, and the Fed is so concerned about the financial situation that there is a chance that it might not hike rates at all while it waits to see how things develop. Despite these concerns, the price action bulls just keep on coming. They have liquidity and seem to be optimistic that the economy will remain strong enough to overcome the banking crisis, as well as some slowing in the economy.

We're seeing lower chances that the Fed will hike rates more than expected, and the chances of a quarter-point hike moved up to around 73%. But we still have disagreement about what the Fed will do, which should set up some volatility on Wednesday afternoon.

The hard thing about this market is that the bearish narrative is so obvious, but the price action refuses to confirm it. It is hard to have very high confidence levels when it seems that the primary argument for the bulls case is a denial of reality.

Have a good evening. I'll see you tomorrow.

As the time of publication, DePorre had no position in any security mentioned.