Monday's session started off poorly, with one of the biggest pre-opening selloffs of 2017 on fears surrounding the implementation of Trump's fiscal agenda. Since then, however, the Friday gap has been almost filled as a new batch of "buy the dippers" came out and did what they have done so well over the past 8 years.
On Friday morning, ahead of Congressional and market rollercoaster resulting from the Republicans' failure to repeal Obamacare, we reported that Dennis Gartman had "moved to the sidelines" and covered his recent short:
Despite the recent modest drop in stocks, the S&P remains just shy of all time highs, and near valuations which according to Goldman are at nosebleed levels and which market participants recently admitted are the most overvalued since 2000. Furthermore, with the market seemingly finding itself painfully rangebound in a world where until recently volatility was non-existent, traders desperate for alpha, have been scrambling for a strategy that produces a steady stream of profits.
Global stocks are lower across the board to start the week, as concerns about Trump's administration to pull off a material tax reform plan finally emerge, pressuring S&P futures some 20 points lower this morning, following European and Asian shares lower, while crude oil prices fall unable to find support in this weekend's OPEC meeting in Kuwait where a committee recommended to extend oil production cuts by another 6 months.
Following the worst week for stocks since the US election, the reflation trade that was launched by the Trump election now appears solidly dead, with the dollar and commodities sliding, inflation expectations crumbling, and junk bonds - where investor euphoria had reached dramatic proportions - being hit the hardest. As Bank of America commented last Thursday, "the last few weeks we have seen wobbles in high yield; a full 2 months earlier than we anticipated.