The Fuse
US equity futures are on the rise this morning continuing a move from Wednesday’s modest rally. Currently, we see the ES futures hovering near very strong resistance in the 5,280-5,285 zone. A break of the higher level could mean much further gains today for the markets. Friday’s labor report is going to be critical to seeing followthrough.
Interest Rates are slightly higher today as traders shed bonds, expecting to see a pretty strong jobs report on Friday. That development would further push out rate cuts in 2024, already several Fed influencers believe only one cut is needed this year, perhaps the data will point to ZERO cuts, which might disappoint the markets.
Commodities were very strong again yesterday, crude rising and gold lifting above $2,300 per ounce for the first time. The metal has been in a strong uptrend, meanwhile bitcoin has pulled back some but may rise up later today. Geo-political concerns are driving the interest in gold and commodities, the rise of which will not help the inflation situation improve. Last night Chair Powell said he still expects rate cuts but not anytime soon.
Strong earnings last night from Levi has that stock moving up sharply this morning, which Conagra is due out later. The bigger earnings releases will get underway next week.
After a two-day losing streak the bulls managed to pull it together and post a winning session. It took all the energy they could muster, but with gains in commodities, gold, oil and technology there was some room to move higher. However, the SPX hit some stiff resistance midday and never really threatened to break through it. Markets are still lower on the week but with some important data and no less than 12 fed speakers the rest of the week, volatility will be on the table.
Breadth showed positive qualities but not all that impressive, perhaps there needs a few more days to accumulate. But it starts with one, and for the past several weeks we have not seen much from this indicator other than flip-flopping from buy to sell signals. The MC oscillator turned negative on Tuesday and remains there, but the news could potentially serve as a catalyst to move this needle into the bullish camp.
Turnover was notably lower yesterday than the prior couple of sessions, and we know that means. Much less conviction on the side of the buyers yesterday. Does that doom this budding rally attempt? Not really, but a series of higher volume days with bearish price action could send the message that buying has dried up for awhile. Wait and see mode.
Some better action on Wednesday with the Russell 2K making a valiant comeback. Recall Tuesday was a miserable day for small caps as interest rates started rising. Economic data helped out Wednesday. For the SPX 500 we still see 5,200 as good support, but a move above 5,230 may trigger a lot of buy programs to hit.
Nasdaq had a postive day and has support now at 18K, The industrials down a third straight session, late selling from Disney did the bulls in.
The Internals
What’s it mean?
Finally an up session for the indices, first one this month (only three days of course). With strength in the VOLD and moderate strength in ADD we saw TRIN move downward from Tuesday’s high levels. Ticks were moderate and far better than Tuesday’s rout. VIX headed down as well as that trend might continue into Friday.
A big labor report and many Fed speakers out the remainder of the week could be catalysts for a sizable move.
The Dynamite
Economic Data:
- Thursday:Jobless Claims, Challenger Job Report
- Friday:March Employment Report, Consumer Credit
Earnings this week:
- Thursday:KRUS, LNN, LWW, RPM
- Friday:GBX
Fed Watch:
Chair Powell with some comments last week basically reiterated what he said the prior week, and that is the data will tell the committee how to proceed. To be sure, the PCE data released on Friday was in line and rather friendly, as it met the committee’s expectations. They are wanting to see more data though and that requires a couple more months. The higher rates on the short end have been working.
Stocks to Watch
Volatility – The VIX often pulls down in front of a long weekend and rebounds after traders return. We’ll see if that pattern holds.
Equity Futures – No response Friday following Chair Powell’s comments and the PCE inflation data, but we’ll see how it goes early in the week.
Apple – Remains an enigma, plenty of news around this name but we often see buyers come to the rescue in times of distress, like now. A big tell on the market.
