The Fuse
Equity futures are trying to bounce back here after yesterday’s extremely rough session. Not even NVIDIA could hold the markets up, as that stock powered higher, other name ran up and simply sold off hard. As we head into the long weekend markets are still up strong for the month of May, but the technicals are starting to look bearish. Enjoy the long weekend!
Interest Rates are dropping a bit this morning but are mostly steady. Fed futures are now predicting a 50/50 chance of a rate cut by September, but those odds are worsening. Inflation is still a problem and until it gets under control there won’t be any rate cuts to come. Interestingly, a very tiny amount of a rate HIKE is being priced in currently. If rates are lower today we may see a nice bid in the market led by the Russell 2K.
That was quite the swing down yesterday from all time highs to a massive down session. A big outside reversal day is an ominous sign when it goes from high to low. The internals were horrible all session long, too. European stocks were lower overnight, down close to .8% while oil is modestly lower and gold up fractionally. Stocks in Asia were down following the lead in the US, Japan down 1.2%, China down from 1-1.7%.
Earnings last night were mixed, poor results from Intuit and Workday, those two stocks are sputtering but strong earnings and guidance from Decker’s has that name up nearly 10%. NVIDIA continues to move higher following it’s strong performance.
Stocks did an about face on Thursday, a very rough and nasty reversal to the downside. After rising up and opening at an all time higher, it was simply downhill from there. Volume accelerated, breadth was poor and put/calls raced higher (see more internals below). The problem of course with hitting all time highs is buyers tend to be nascent, there is not much fuel left in the tank and the sellers eventually take over.
Very poor breadth has now put this indicator in the bearish camp. Oscillators, which were floating around the zero line Wednesday are now firmly negative. Another day or two of a market rout would put the oscillators oversold, where a significant bounce could ensue. New highs continue to expand but the rate of change is slowing down, something to watch out for.
Volume was heavy on Thursday especially in the Nasdaq and Dow Industrials, which saw most issues in the red. A minor setback is one thing, but a followthrough dow down would be concerning to the bulls. Without much support for the Dow Industrials other than 39K an acceleration of volume could lead to much lower prices, and with the summer coming up an few catalysts to push stocks higher (like earning), the sell in May crowd may start to come alive again.
So much for 5,300 holding as support. That fell like a hot knife through butter, and is now set up as strong resistance. That is because a break on higher volume yesterday. There is support for the Nasdaq down further than current levels, around 18K or so. The SPX 500 and the Industrials are in much deeper trouble if there is a followthrough to the downside today.
The Internals
What’s it mean?
There is not question the internals have been calling the shots of late. The VOLD and ADD have been leading the markets lower, even as the VIX and put/call have shown some bullish qualities. ADSPD fell and booked a trend down day, VIX was up and near highs of the session, while the TICKS remain concentrated in red, as they were on Wednesday. Danger signals ahead.
The Dynamite
Economic Data:
- Friday:Durable Goods, Michigan consumer sentiment final
Earnings this week:
- Friday:BIG, HIBB, BKE
Fed Watch:
With some better data of late one would think the Fed committee members would be willing to ease up a bit on the hawkish rhetoric. One would think…but it’s not happening. We have several fed speakers this week, nine early in the week. Last week Chair Powell pretty much reiterated what was said at the last meeting, but that was before the better than expected CPI.
Stocks to Watch
NVIDIA – The monster semiconductor company will release earnings after the close Wednesday as many are looking for some strong numbers and guidance. They have rarely disappointed the past few quarters, at some point they will not meet those lofty expectations.
VIX – Volatility is down in the dumpster once again, closing under 12%, which is a danger zone. Could it go lower? Of course, and with the holiday coming up that is a strong possibility.
Retail – With last week’s poor April retail report it’ll be interesting to see/hear what many companies say this week. Several names will report like Target, Lowes, TJX and Ross. Will they reiterate the consumer slowing down?
