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Morning Notes — What to Expect

What to Expect

February 11, 2022

It’s very common for equities to rebound after a sharp/sudden correction. Since 1990, the average rebound from a ~10% correction has lasted ~13 sessions before pausing, pulling back or retesting lows.  A retest to the prior intraday low (4,222 in this case) occurs about 50% of the time, and a successful retest includes a shallow break below that level ~25% of the time. Any retest usually hits the liquid/large cap/most crowded names most.  All retests include elevated equity volatility with the selling of the largest, most liquid stocks reflecting capitulation, which serves a clearing event.  In the current environment, think ‘safe haven’, secular mega cap Tech where valuation spreads to small cap stocks are at record highs.  A shallow break of the intraday correction low of 4,222 might take the index to ~4,100, but such an event would likely engage a number of systematic (CTA) momentum-based buy triggers.   

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