DAILY RECAP: Markets Churn After Brussells Tragedy

1) Tragedy in Brussels

Early this morning, an airport and subway station in Brussells, Belgium suffered three explosions that took the lives of at least 30 people and wounded hundreds more.

Terror organization ISIS claimed responsibility for the attacks, and Belgian authorities carried out raids searching for those responsible.

Our thoughts are with all those affected.

European markets opened weak on the news, with the Euro Stoxx 50 Index falling -1.7%.

However, traders bought the tip, and the Euro Stoxx, German DAX, and French CACindices all finished up 0.1%.

We saw a similar turnaround in European bonds. The 10-year German bund yield fell as low as 0.180%, but bounced back to finish at 0.211%.

Gold also shot up on the news, with futures going as high as $1260.90/oz

2) Biotech Leads a Bounce

US futures followed the initial dip in Europe. but firmed up this morning, even with crude oil in the red.

The tell for the S&P 500's recovery was an early bounce in biotech (IBB), which led US markets with a 2.6% gain today.

As I pointed out in last Friday's Daily Recap, biotech looks like it formed a double bottom around the $244 level after 3 straight days of notable underperformance.

Biotech has lagged since the February 11 interim bottom, but it's been performing well for 3 straight days and is within striking distance of the 50 day moving average, which it hasn't seen since early January.

In 2014 and 2015, it was very common for biotech to move before the major indices, and that's exactly what we saw today.

The S&P hit an early bottom of 2040.57, and as I announced in the Buzz & Banter, I look a long position in SPY just before 10:00 a.m.  The S&P floated as high as 2056.6 before easing back to close at 2049.80, down -0.1% on the day.

This was the 7th straight day that the S&P failed to finish up or down 1%.

3) Overbought and Overhated

Bizarrely, markets still seem both overbought and overhated at the same time.

Over 93% of S&P 500 stocks are above their 50 day moving averages, the highest percentage we've seen since 2013.

The S&P itself is about 6% over its 50 day moving average, within range of conditions at theNovember 3 interim top.

But on the flipside, options markets imply that traders are betting big on a drop.

Today, the ISE Sentiment Index dropped to 54, meaning 54 call options were purchased for every 100 put options.

Put options on the S&P 500 and the iShares High-Yield ETF (HYG) remain extremely expensive relative to historical norms.

And put-call ratios on major ETFs have risen dramatically.

So while the market feels overbought, the fact that so many traders are betting on a downfall means sentiment is not as positive as price may indicate.

We've been in pretty boring holding pattern, and traders are on edge as they await a real move. I'm thinking it comes to the upside.

TOMORROW'S FINANCIAL OUTLOOK

Tomorrow, MBA Mortgage Applications, New Home Sales, and Crude Oil Inventories will be released.

Francesca's Holding Copr (FRAN), General Mills Inc (GIS), and Iconix Brand Group(ICON) report earnings before the open. Fuel Tech Inc (FTEK), KB Home (KBH), and PVH Corp (PVH) report after the close.

Overseas, New Zealand will release Trade Balance Data.