The Fuse
Equity futures are rallying smartly this morning after two straight down sessions. Though the price action has been poor as has been the lack of buying interest, we come to the end of the month/quarter where buying power may be flexed. 5,300 on the ES futures seems to be a ceiling, we’ll see if it holds today.
Interest Rates are falling on the long end of the curve early this am, continuing a theme of late. Lower rates will most certainly help small cap stocks, as we may see the IWM benefitting here from lower costs. As long rates slowly come down it means timing for a Fed rate cut gets closer and closer. The yield curve remains relatively steep.
Gold is ripping higher early this am, rising more than 1% on the gold futures. Oill is slightly higher, European stocks were slightly lowever overnight but stocks in China gained nice ground. Bitcoin remains very strong and is lifting several names along with it. The big crypto currency has moved above 70K. Concern recently about a disconnect between earnings expectations and share price has grown this week. MS and JPM strategists were warning the market is starting to look overpriced, saying it’s hard to justify being long equities unless profits accelerate.
Earnings are few and far between this week, but we’ll hear from RH, CCL and CTAS on Wednesday.
Stocks fell hard again Monday in a continuation of last week’s spill. Volatility was elevated in the early going as it appeared the markets were headed for some heavy damage, but the buyers stepped up and brought markets back near the flat line. Whether just some short covering or simply running stops up and down, the market finished near the lows of the session again on putrid volume.
Breadth was actually pretty strong most of the day until the constant selling took hold and just pounded the markets relentlessly. The Russell 2K had been leading the way with higher prices most of the session but that index fell hard to close on its lows, albeit positive (the only one of the four indices). Oscillators turned lower as we would expect, now both MC oscillators are in negative territory. New highs still were very strong as market rotation remains the story.
A down session for the markets but also a down session for volume, which means little conviction in the selling. The markets have shown some good upside when the volume has been strong, hence solid accumulation days. With only a few days remaining in the month/quarter we expect to see the turnover start to pick up. We often see a day of ‘window dressing’, big institutions buying stocks to show on their sheets at quarter end.
The SPX 500 remained above 5,200 on the close and after a couple of down sessions might be ready to make a move on 5,300. The Nasdaq, for its part remains trapped in a range, under 19K but that level looks read to faill sooner or later. We see support at 18K here, while the Dow Industrials is trying to make that run to 40K, which would be an amazing milestone.
The Internals
What’s it mean?
Pretty dour day for the internals but volume trends were not as bad as one would have thought. Notice the huge drop in TRIN yesterday, indicating better volume vs the advance/decline line. That’s technically bullish, but did not happen over the full trading day. Ticks were bright red all session long and heavily concentrated in $TICK/Q. That is the Nasdaq, which was not showing any sign of accumulation. VIX closed off the highs of the session but the ADD fell sharply, and that is what hit the breadth indicators. We’ll see how things line up later in the week.
The Dynamite
Economic Data:
- Tuesday:Durable Goods, Housing Index, Consumer Confidence
- Wednesday:Crude Oil Inventories
- Thursday:Jobless Claims, 3rd Estimate GDP Q4/2023, Michigan Sentiment, Pending Home sales
- Friday:PCE price index for February, income and spending
Earnings this week:
- Tuesday:MKC, GME
- Wednesday:CCL, CTAS, PAYX, JEF, CXM, RH, BRZE, VRNT,
- Thursday: WBA, SMTC
- Friday:
Fed Watch:
The Fed meeting last week came and went, equity buyers were eager to add more stocks if the committee and the Chairman simply lowered the bar. That was the case, though the statement was identical to January’s print. The market is finally coming around to the Fed’s thinking of 2-3 rate cuts in 2024. It’s been a painful push back but frankly a market in alignment with Fed policy is needed.
Stocks to Watch
Volatility – With a short week coming up and end of the month window dressing likely, we’ll watch for the VIX to take another dip lower.
Semiconductors – It was a big week for NVIDIA and their shareholders/conference, but news Monday from China about not using AMD or INTC chips any longer may counter some of the big positives of late.
Boeing – The company announced a big shakeup Monday with replacing the CEO by end of year. This may eventually help the company and stock, which has been performing badly this year.
