The Fuse
Futures are pulling back a bit this morning following Monday’s strong showing. ‘Turnaround Tuesday’ is pretty common, but we’ll have to see how the market reacts and responds to earnings reports and higher interest rates.
Interest Rates rose again Monday but the stock market didn’t seem to care, as recent sessions when rates rose helped to push markets lower.
If the 10 year sneaks up on 5% again that will be bad news for equities, but a drop in rates might do some good. One Fed official (Harker) believes the Fed is done raising interest rates.
President Biden will pay a visit to Israel this week, hoping to assess the situation and figure out a peaceful solution. China came out in support of Hamas, no surprise there. Oil fell a bit as did gold but these commodities have been well bid for over a week now, so buyers may continue to add.
Strong earnings out this am from JNJ and raised guidance while we saw a slight beat from BAC and GS as well. Following yesterday’s surge it’s not surprise to see the markets back away, but more big earnings out later in the week.
It’s a big options expiration week coming up on Friday, and all signs point to a volatile week of action. Market volatility is on the rise and has been for a few sessions. The VIX has been making a move towards 21% and could threaten to break higher this week.
Solid breadth all session long as buyers came in from the weekend in a bullish mood. We’ll have to see of course if there is some followthrough, but so far stocks have held firm above support. Resistance is just above here though but if there is a more good breadth then we can move through that area onto the next level.
Good turnover but not great, less than Friday’s so yesterday was not a day of accumulation. Stocks were strong across the board however and turnover was decent, we expect to see more volume later in the week as the market digests earnings releases, deals with volatility and options expiration on Friday.
Markets continue to fluctuate, but the fever pitch of the bulls is starting to get louder. No doubt it is the excitement of earnings season, the bar is lowered significantly and we may see some really bullish moves over the coming days. However, we do have to remind you the range is still in place and prices are near the top, which is going to be some heavy lifting.
What’s it mean?
Pretty strong day for the internals, the first big session since a week ago Monday. VOLD was ripping higher all session long and finished on its highs, another day and this indicator will be in bullish mode. The TRIN move down sharply as did the VIX, but the ticks were very impressive. See the green arrows that swamped the red? Yep, buyers taking control. Put/calls were elevated and higher interest rates may have spooked some investors. Followthrough would be key here.
The Dynamite
Economic Data:
- Tuesday:Retail Sales, Industrial Production/Capacity, biz Inventories, housing market index
- Wednesday:Housing starts, crude inventories, Fed beige book
- Thursday:Jobless claims, Philly Fed index, Home Sales, Leading Indicators
- Friday:Japan Inflation, German PPI, UK retail sales
Earnings this week:
- Tuesday: ACI, BACK, BK, GS, JNJ, LMT, IBKR, JBHT, UAL
- Wednesday: ELV, MS, PG, AA, CCI, LRCX, NFLX, PPG, SAP, STLD, TSLA
- Thursday: AAL, T, MAN, NOC, UNP, CSX
- Friday: AXP, SXT, VFC
Fed Watch:
More Fed speak this coming week, but we heard plenty the last two weeks and from the meeting minutes released on Oct 11th. It seems the latest data and information is slowly turning the Fed less hawkish, but only slightly. Yet, there are several on the committee who are willing to wait it out even longer. Let’s see how the market responds to the higher inflation readings from last week.
Stocks to Watch
Netflix – Always interesting to watch how this stock moves following earnings.
Tesla – This EV company reports earnings this week and while car sales have been brisk, the concern is over margins as Tesla continues to cut prices sharply.
Interest Rates – They rose sharply this week then collapsed again Friday, we’ll see if they make a run at new highs or fall down as the safety trade is back (Middle East turmoil). We’ll be watching gold as well, which put in a spectacular week.
