Market 07/10: Cautious ahead of earnings season, deflation threat from China

The familiar market script continued to repeat on Friday with mean reversion around the 4400 area of SPX. All stock sectors started the day quite strong with small caps leading the money flow attraction before fear psychology began to creep into investors in the second half of the trading session, creating put hedge demand and pulling volatility bounce back up. Combined with low liquidity in the Friday afternoon, the surge in volatility created a quick sell-off flow towards the end of the session.