The Fuse
Equity futures are down a bit this Wednesday morning as overnight worries from Europe have spilled over into our markets. The 4,400 level on the ES futures has been tough to breach on a close, and while the futures did manage a close right on that level yesterday, there needs some confirmation.
Interest Rates continue to move upward on the long end of the curve, with the 30 year up close to 5%. That yield is going to be an important spot for investors and traders, and if rates continue their trajectory higher the equity market will feel some pain. Borrowing costs have risen significantly, mortgage rates are up near 8%. November VIX future is now the front month.
More bad news coming from Israel and the Middle East where attacks are happening constantly. Oil prices are spiking again as is gold, which is making a run to 2K one more time. If the development over in the Middle East escalates more then we could see more upside in commodities.
Earnings have been mixed. MS posted strong numbers this am but last night was a disappointing result from UAL. Tonights big deliveries will be from NFLX, TSLA, LVS, LRCX, DFS,ZION and AA.
High volatility yesterday with some big swings up and down, but at the end of the day the indices had barely moved. On the chart we call this day a doji or a day of indecision. Though the markets started lower and finished near the higher end of the range, there was little momentum, rather stocks just moved sideways back n’ forth as in a bathtub. We hope to see a bit more action in the coming days.
Good breadth, thanks to bullishness in the Russell 2K yesterday. Commodities, especially crude oil stocks were up sharply and paced the action.
Higher rates continue to plague growth names, and until there is a break in yield we are not likely to see a breakout in the Nasdaq.
Better volume all around as stocks moved higher early and caught a bid late in the session. We’ll call it a day of accumulation, the indices are now looking for a followthrough day to get a bit more bullish..
It turns out 4,380 on the SPX 500 is pretty stiff resistance. That level was tested again yesterday and failed miserably. Buyers are simply not interested in that area as of yet, but perhaps they need some ‘convincing’ to start making stock purchases. Nasdaq was the weakest wheel yesterday but that could change today as leadership re-emerges.
What’s it mean?
The internals were rather mixed on Tuesday with a strong move up by VOLD, which closed very well to end the day. Good breadth and volume are the indication here. Ticks were mixed too, the TRIN nose-dived so that is a red flag alert, while VIX finished higher but well off the highs and lows of the day, a doji formed. Put/calls are mildly bearish here.
The Dynamite
Economic Data:
- 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:
- 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.