Economy Shows Signs of Strength, Raising Chance of Market Pullback
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The stock market may see a sizable pullback as economic data suggests fewer rate cuts than expected. Retail sales and inflation data indicate a stronger economy and higher rates.
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Volatility may expand after VIX options expiration on January 17th, leading to potential movement above 14 and impacting mega-cap tech stocks.
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Positive options flows have built up in mega-caps like Meta, Nvidia, and Microsoft, which may reverse after January 19 options expiration.
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Market internals are deteriorating despite index levels holding steady, indicating the market rally is not supported broadly.
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The window is open for the S&P 500 to retrace most if not all of the gains since the October lows once supportive flows reverse.