The Fuse
Equity futures are soft this morning after the very strong showing in markets on Thursday. With a very deep oversold condition the stock market was due for a rally, and that came all day long yesterday. Solid internals (below) and price action but we still find the SPX 500 below the key 20 ma. Yesterday’s surge up past the 50 and 200 ma was impressive, but followthrough is needed. Today is a big options expiration day, Plenty of volatility.
The SPX 500 seems trapped in a zone here, the top side is 4200 while the low side is 3800. That could be the range the entire year, perhaps expanded a bit lower to 3600. That will frustrate everyone, bulls and bears alike.
More fallout from this recent banking crisis, the Fed dumped a slew of liquidity into the markets this past week to try and shore up any deficiencies. We have seen panic hit banks in the past with a bank run, that’s not a welcome sight. The ECB raised rates again, this time 50bps to 3.5%. They continue to fight inflation even with banking issues of their own. We suspect the Fed will state the same next week.
FedEx with strong earnings after the close.
Data came in rather light, with export prices up but jobless claims down.
Breadth was pretty solid yesterday, a huge turn from earlier in the session. That turn is meaningful if there is followthrough.
With so much selling at the start of the day the low was made early on. There were some strong surges of volume after midday, volatility fell and it was only a matter of time as the bulls took control.
The VIX fell sharply on the day, down about 12%. With positive news out on these banks and plenty of liquidity coming in the bulls took charge in a hurry.
The Internals
What’s it mean?
After pulling back on the reins Wednesday the bulls get it going Thursday, as the internals show very solid action. The VOLD was straight up Thursday along with the ADD, put/calls went down as that indicator was deeply overbought. VIX was smashed too, as fear from the banking issues seemed to melt away. All in all, a good day for the bulls, but next week will be a major test.
The Dynamite
Economic Data:
- Friday:IP/cap utilization,, LEI, sentiment, Eurozone CPI, labor cost index
Earnings this week:
- Friday:BLDP
Fed Watch: Next week’s Fed meeting will be pivotal, all eyes/ears on Chair Powell after the meeting in the press conference.
Stocks/Issues to Watch
Name – Options expiration – it’s a big one, triple witching.
Name – Interest rates – continuing to move lower.
Name – Market volatility seems to be declining at a fast pace in front of next weeks important Fed mtg.
