2-11-16 – Where is the market going?

Stocks opened broadly lower and the decline is gathering momentum into midday Thursday. The S&P 500 is off 35 points to 1816.86 and four points from session lows.

Weakness across overseas markets again set the table for morning losses on Wall Street. Hong Kong’s Hang Seng sank 3.9% on its first day of trading after being closed for holiday. Shanghai remains closed until next week. However, other markets across Asia and Europe suffered steep losses Thursday as well.

The dollar is under fire and wreaking havoc on the “carry” trade. Meanwhile, weakness in the buck is fueling a $50 surge in gold. Yet crude oil dropped another $1 to $26.45.

Macro fears are palpable in the bond pits. Flight-to-safety and two days of seemingly dovish commentary from Janet Yellen to Congress have conspired to send the yield on the benchmark Ten-Year Treasury to two-year lows of less than 1.6%.

On Wall Street, red is being seen across the board. Financials (XLF) are the biggest losers due to concerns about sliding yields and exposure to credit risk. Industrials (XLI), Energy (XLE), and Basic Materials (XLB) are seeing relative weakness as well.

CBOE Volatility Index (.VIX) hit a high of 29.01 and is up 2.43 to 28.72. Trading in the options market is active, but there are no signs of panic so for. 4.6M calls and 4.6M puts traded across the exchanges through the first two hours.

VIX March 30 calls, SPDR Gold Fund (GLD) Mar 125 calls, and SPDR 500 Trust (SPY) Feb 180 puts are among the most actives.

A handful of companies including Tesla (TSLA), Cisco (CSCO), and Twitter (TWTR) are out with earnings, but stock specific news is clearly taking a backseat to macro worries this week.

On the technical front, the S&P 500 made a successful test of its Jan 20 lows of 1812.29 Thursday after touching an intraday low of 1812.82. Although the “buy-the-dip” crowd is understandably reluctant to stick their necks out too far ahead of the three-day weekend, this level should serve as short-term support. Also watch Apple (AAPL) as it tests the lower end of the 2016 range and US Oil Fund (USO) as it also probes its Jan 20 lows. On the upside, there is obviously plenty or resistance to challenge rally attempts, including today’s high of 1847 on the S&P 500, followed by 1850 on up to 1880 and 1900.