The Fuse
Equity futures are getting hammered this morning as traders wake up from the long weekend and are seeing red. When futures opened Sunday evening they started off green and were traversing around the flat line most of the day but the selling kicked in about 530am EST. We’ll see if first of the month money flows are enough to overcome these opening losses.
Interest Rates are slightly lower across the curve as a safety trade seems evident. Risk off mode often means investors reach for some yield even in the short term as they pick up some bonds.
Not much to report on the news front over the weekend but there was a skirmish in the Middle East that caused some panic. Overnight saw the European markets rather flat, the dollar also unchanged. Gold is barely moving while crude oil is getting hammered, down 2% as well as other commodities selling off. In Asia Japan’s market was flat while China and Hong Kong posted losses. Some negative economic data out of China tells us their economy is skating on thin ice.
Earnings are certainly slowing down this month but we’ll hear from Broadcom later in the week . A few particular names like Dick’s Sporting Goods, Rev Group, Zscaler and smaller tech names like Docusign and Guidewire will be on display this week.
It is the start of a new month and it is September, notorious for being the worst trading month in the calendar year. Yet, we have seen a strong September on many occasions after August posted a win, which happened this year. There is plenty to wrangle about including more worries from the Middle East and now we are about 63 days out from a big election day. Markets still reflect high volatility into the end of October and even higher volatility into 2025.
Breadth was pretty good overall on Friday but started of skittish. Small caps were not rallying to start the day but that changed drastically by the closing bell. Oscillators are back into positive territory, new highs expanded yet again. Both this and breadth are on buy signals. This could carry the market rally further if new highs in cumulative breadth are reached soon.
Volume has been underwhelming, of course with the holiday week coming up and the A traders set to return next week all of that will change soon. Don’t expect to see big volume return however, even though we are at the start of the month. Remember, we are near highs and traders do not often get that involved with the markets in this rare air.
Support levels were again tested this week, the SPX 500 at 5,600 held firm and now are within striking distance of all-time highs. Nasdaq has good support still at 19,200 and just below but current trades in a ‘no mans’ land area. The Russell 2K (IWM) is more interesting in that it continues to find support at 210, and eventually the 220 level will be the next area of support, perhaps next week.
The Internals
What’s it mean?
Typical summer Friday with some volatility and excitement at the end of the day. Buyers came in hard as the last couple hours of trading in August were at hand. Notice the big surge in VOLD and ADSPD, it means big volume was coming in to buy the market up. VIX went lower on the day but look at those ticks, which may portray some difficulty today and later in the week. Put/calls remain elevated but are making a move.
The Dynamite
Earnings this week:
- Monday:holiday
- Tuesday:ZS, GTLB, ASAN, HQY, PD
- Wednesday:DKS, DLTR, CIEN, JILL, HPE, CASY, AI, CPRT, AVAV
- Thursday:NIO, FCEL, SAIC, LE, GIII, KFY, AVGO, PATH DOCU, PL, BRZE, ZUMZ,TLYS
- Friday:BIG, ABM, BRC, GCO
Economic data this week:
- Monday:holiday
- Tuesday:PMI final, construction spending, ISM manufacturing
- Wednesday:Trade deficit, job openings, factory orders, Fed beige book, auto sales
- Thursday:ADP, jobless claims, productivity, PMI final services, ISM services
- Friday:NFP for August, hourly wages, unemployment rate
Fed Watch:
A little Fed speak this past week but nothing too notable, Atlanta Fed Chief Bostic trying to play shy about rate cuts. This coming week we’ll hear from NY Fed President Williams and Fed Governor Waller. We don’t expect much to change but those two speak AFTER the jobs report is released, so it may have some impact.
Stocks to Watch
NVIDIA – After reporting strong earnings last week the stock sold off sharply and is settling into a range. That will frustrate most traders but give it some time, the stock is likely to break out past $132 when nobody is looking.
Labor – With the markets closed Monday for the Labor Day holiday it seems appropriate the jobs report come henceforth. Last month’s reading was less than expected but economists are looking for something stronger this time around. Eyes on the unemployment rate and wages.
Banks – This group has been strong of late, especially JPM and GS. Keep an eye out here on this group as a strong breakout might bring higher prices. For sure, low rates have been seen as benefiting the banks (mortgages, refis).
