The Fuse
Stocks are under pressure again this morning as the carryover from yesterday’s heavy selling continues. Today we’ll have a big expiration, stock and equity index futures expire on the close with a heavy skew towards downside movement.
Interest Rates are moving lower off their best levels of the week but the move above 4% on the long end of the curve has done plenty of damage to the equity markets. Next week we’ll hear from Chair Powell in a speech that may move markets sharply.
The indices have fallen off a cliff this week/month and are starting to hit the headlines. With big cap names starting to crack we are seeing the spread of negativity. That is seen in the breadth reading, put/call (see below) and other indicators. Perhaps the 5.8% estimate for growth is not what the Fed wants to see.
Very strong earnings last night from Applied Materials and raised guidance, this morning also very strong beat for Deere but that stock is off a bit to start the day. Even with strong earnings the stock market is weak, it would make sense for many traders/investors to take money off the table in front of the weekend.
It’s becoming a theme this week as stocks again took it on the chin yesterday as the markets are in correction mode – for all intents and purposes. The SPX 500 is solidly below the 50 day moving average, as is the Nasdaq.
More poor breadth on Thursday as the bulls tried early to pull out a win, but the selling pressure was too much to overcome. There is a great deal of pessimism being built into the markets now and the poor breadth is the main driver. New lows are crushing new highs now.
Strong turnover again as professional selling continues. Markets tried to push higher early in the day but volume trends were poor, then the heavy selling came and like a hailstorm there was nowhere to hide. Until this subsides the trend remains down.
As we mentioned yesterday, 4,400 was going to be tough to break but it was sliced through like a hot knife through butter. We can logically see 4,330 coming in as the next level of support, about 1% lower than current levels. Below there 4,300 but the SPX chart turns bearish in my view.
The Internals
What’s it mean?
Just an ugly day all around. The VOLD collapsed midday and kept sliding, check ou the reversal on the ADD as well. Most notable were the ticks, a concentration of red all day long in the NYSE and the nasdaq. Clearly bearish, while put/calls still climbed higher, big money continues to buy protection. The VIX close higher but not above 18% yet, it may get there soon. Volatility sellers nowhere to be found today.
The Dynamite
Economic Data:
- Friday: Eurozone CPI, Japan CPI
Earnings this week:
- Friday: BKE, DE, EL
Fed Watch:
Fed meeting minutes were out this week and they were not pretty. Stocks mostly sold off on the notion most all fed officials believe higher rates are coming soon.
Stocks/Issues to Watch This Week
Options – A big options expiration this week with a slew of equity options expiring Friday, always volatile.
Retail – Huge week for retail stocks as the ‘big names’ will deliver their earnings releases, along with retail sales Tuesday morning.
Nasdaq – This index has now fallen below the 50 day ma for the first time since early March, when the Nasdaq went on a monster run higher. Let’s see if the Nasdaq repeats the pattern.
