New Dangers Below the Surface

The weakness in financials is at the forefront of the market weakness this morning, as their underperformance since last weeks FOMC is becoming a bit more pronounced while equities as a whole staged a "gap-and-fade" this morning. 

On the one hand, we do not want to become overly-sensitive to intraday market moves. However, the constant fading of strength we have seen the last few sessions, combined with that weakness in banks is a danger below the surface this market has not experienced in a good while.

Recall that the financials have not only been on a tear higher since last November's election, but they then frustrated bears to no end by giving virtually none of that rally back. Indeed, the XLF and KRE ETFs for the financial sector were textbook examples of consolidating overbought conditions through time, rather than through price--At least on the surface that was the case.

But we can never become sloppy as traders, making too many assumptions. And if the banks were actually churning the whole time, setting the stage for a surprise drop, it may be a danger the market was not anticipating, especially since The Fed actually did, in fact, raise rates. 

With this in mind, I suspect some plays ancillary to financials, like the credit card giants AXP MA V, may ripe to follow the gang lower for a few days or so. 

Moreover, the AAPL FB early strength this morning was clearly not enough to galvanize momentum traders for broad-based upside moves. So while there is plenty of trading ahead today, the gap-and-fade recurring motif in markets is becoming rather tedious.