The Fuse
Equity futures are strong and are catching a bid this morning following a mixed Monday session. Traders will be treated to some inflation reports the next couple of days, including PPI this morning and CPI on Wednesday. With elevated volatility if these reports are friendly we’ll see the VIX decline sharply and stocks start rising up.
Interest Rates are just slightly lower this morning as bond traders await the inflation data. If good news we might see yields fall a bit, the 10 year is hovering near 3.9%. The recent drop to 3.7% is aggressive and puts the Fed in a difficult spot.
Worries over attacks in Israel goosed oil and other commodities on Monday. Crude oil is now bumping up against $80 per barrel. An indicator is telling some economists there is a 40% chance the economy is in a recession. In Europe, stocks rallied a bit as did the FTSE index in England. Gold is flat but has settled now over $2,500 per ounce. The bund in German declined slightly (yield),, stocks in Asia were strong, Japan up 3.4% while Hong Kong and Shanghai gained a fraction.
Earnings out this morning from Home Depot were a disappointment and the stock is getting hammered on the news. Smaller names have also reported and will be out later today. Wednesday morning has Brinker, UBS and Cardinal Health.
After a couple of up sessions in a row markets were mixed on Monday. Clearly traders/investors were lacking a commitment in front of inflation data due out today and tomorrow. Resistance is not far above here but if the markets can penetrate those levels on good volume the bulls will have something to work with.
Breadth was challenged from the start, small caps were pretty weak all around as the Russell 2K finished down about 1%. Remember, the small caps have big influence on breadth. Oscillators remain negative but a couple of up days might get them bullish. New lows are still expanding above new highs, that indicator is bearish.
Volume was light again as the market rallied up to resistance. Is this just a deadcat bounce or something real? We’ll have to see a few more days and if buyers continue to push prices higher on good volume then the trend could change.
A pretty tight range on the day but a higher high, higher low on the chart as a doji was formed. This means support from last week continues to hold, short term moving averages like the 5, 10, 13 and even the 20 are going to start moving up quickly this week. Industrials are off to a weak start this week but with three names reporting this coming week its possible they will get up off the mat.
The Internals
What’s it mean?
What turned out to be mixed on the session was a pretty boring day. Buyers came in early but finished up and the sellers came in hard after the internals turned lower. The VOLD and ADD had no upward momentum, and it appeared a bigger selloff was imminent but that was not to be. In fact, a near flat session for all but the Industrials and small caps. It seemed Monday was just a continuation of Friday’s action. TICKS were moderate but favoring the bears, VIX was up most of the session but started to head lower, put/calls were sideways. All in all, a tossup.
The Dynamite
Economic Data:
- Tuesday:PPI, NFIB optimism
- Wednesday:CPI
- Thursday:Retail sales, jobless claims, industrial production, cap utilization, business inventories
- Friday:Consumer sentiment, housing starts, homebuilder confidence
Earnings this week:
- Tuesday:HD, MLCO
- Wednesday:EAT, DOLE, CAH, UBS, CSCO, AST
- Thursday:WMT, JD, DE, BABA, AMAT, HRB, COHR
- Friday:FLS
Fed Watch:
Probably a quiet week for the Fed in front of next week’s summer conference in Wyoming, known as Jackson Hole Monetary Meeting. Chair Powell is likely to deliver the keynote speech, where he will likely reiterate the committee’s stance on policy, and probably to pull any surprises. This meeting has often been a place where clues and hints are dropped to the public eye.
Stocks to Watch
Volatility – VIX really spiked last week but has had a crash down move since Monday. With lower VIX comes more confidence from traders and investors. We’ll see if the trend continues this week with some big earnings on tap and inflation data.
July Inflation Data – PPI out on Tuesday, CPI out on Wednesday, Retail Sales on Thursday. Those are the big numbers to focus on this week as they will give us fresh data to help us and the Fed determine the direction on monetary policy.
Retail Earnings – It’s a big week for retail with Home Depot and Walmart reporting their quarter. The charts are not terrific but they both have often surprised to the upside when the worst is expected, like now.
