U.S. Markets closed

Stocks slip and U.S. dollar slides into quarter-end

Stephen Guilfoyle

By Stephen Guilfoyle | @Sarge986

Good Afternoon,

End of the quarter. Surely you will see larger than usual closing imbalances as there will be some rebalancing to do.  What you'll see is some funds forced either by circumstance, or the calendar to do what they do daily, but in concentrated manner—manage risk, and try to enhance performance.

Earnings releases are a quarterly game, and thus, for many, end-of-quarter seems to be the time to figure out what went right, what did not go so right, and whether or not your prior thoughts—thoughts that may not have worked out—just need more time, or need to change. There are also funds that have mandates that force them to act at times like this in order to remain in line with their stated intentions.

Given the recent run in equities ( ^DJI^GSPC^IXIC^RUT), and the wobbliness seen in Treasurys, and given the way that many pension funds (about half) rebalance (either quarterly or monthly) based on relative performance (equities versus fixed income), it stands to reason that   tonight's close could be more negative than it would have been just a couple of weeks ago. Certainly more so than a month ago. 

Now, this doesn't mean that you'll have a big minus tick to hang on the closing bell.  These things do pair off. The public has been there the last few days every time the markets have tried to come in. But this time, the public can ring the cash register (they have profits), so their collective reaction is somewhat unknown. Brain food. Could get hairy.

Five things to keep in mind this afternoon

1) Energy ( XLE) is your leading sector today, boosted by WTI crude oil ( CLK16.NYM) that is only mildly higher. The swinging door that is the $39 level has not yet been regained and held— and "held" is the key word here.

2) My S&P 500 ( ^GSPC) trading levels in this neighborhood are 2161 and 2169. The index has yet to test either one.

3) The U.S. dollar ( ^USDOLLAR) is weaker again, which is helping gold ( GCJ16.CMX) overcome Wednesday's spate of profit taking. Our mental stop orders remain 1210 and 1275.

4) Interestingly, along with gold, the VIX ( ^VIX), the utility sector ( XLU), and U.S. Treasurys ( ^TNX) are slightly stronger. Is this something of a safety play ahead of quarterly re-balances and jobs data on Friday? Nothing earth-shattering here, but I will be watching this.

5) All that said, I don't smell any fear yet. Though New York Fed president William Dudley does speak after the close of business today.