Excess is the hallmark of this market. Extremes in valuation; extremes in technical levels (in some respects especially FANG and MANA stocks); and extremes in complacency too as reflected by lower CBOE S&P 500 Volatility Index (VIX) again, writes Gene Inger.  

Near term there are many variables in the news. Wednesday’s market pattern in essence adhered to the expected upward consolidation after downside in the early going, as normally follows an outside-down-day (little noticed by technicians Tuesday).

However, there was no late fade ... initially.

Reuters: Wall Street dips Wednesday afternoon after Trump cancels North Korea summit, targets import cars.

chart 1

Technically this market is hanging on and whether or not it’s defensive as we go into the Memorial Day holiday weekend is still pending. This isn’t essential from the viewpoint of anticipating the next defensive phase (or market correction).  

chart 2  

In sum: The market evolves generally as outlined and we’ll make this brief accordingly. The Fed Minutes generated talk of a more dovish Fed. That is not my interpretation but of course that was the media's take. And that helped the market persist with an afternoon rebound.

There is no change in the overall view that this is a long-in-the-tooth S&P 500 (SPX) and that the FANG and similar stocks are run-in shorts. They drag others along as it becomes evident (like Wednesday morning) that nothing else is moving.  

Daily action -The market might react Thursday to the auto tariff study ordered by the president, although it’s likely going to be viewed as negotiating.   

chart 3   

The overall picture is little changed. I suspect we’ll see a bit more of a slugfest with little net progress on Thursday, with yet another shot at defensive action later on.  

Overall the market remains at extremes, in valuations and complacency.   

chart 4   
chart 5   

Subscribe to the IngerLetter here