The Fuse
Equity future are up modestly as the Nasdaq tries to bounce back from a down session. The SPX 500 is looking to extend its streak to seven sessions in a row. The crucial Fed meeting starts today, a policy statement will be issued Wednesday afternoon.
Interest Rates are modestly lower this am as the fixed income crowd continues to buy bonds to help push yield down. Today starts the Fed meeting and many are concerned about backlash if the committee decides to only cut 25bps this time around. Fed futures still see more than 4 cuts in 2024.
Overnight markets were pretty strong save for Japan. European stocks were higher by more than .5% while Hong Kong was up more than 1.3%, Japan down about 1%. Shanghai was closed. Gold is off slightly but remains well-bid above 2,600 per ounce, silver also remains bid. VIX is down slightly, crude is up about a dime, above $70 per barrel WTI crude.
Earnings are sparse this week with t he bigger names coming Wednesday and Thursday in General Mills, FedEx and Lennar.
A pretty sleep session Monday but a gain nonetheless for the SPX 500 and the industrials. The latter nailed an all time high while the former is just slightly below. Today begins the Fed meeting which many believe they will usher in a new monetary policy of easing, but it remains to be seen how aggressive they will be. Certainly some on the committee would like to see more stimulus to ease the landing.
Good breadth again as this indicator is now overbought, so even a poor day would still keep breadth on a buy signal. Oscillators are approaching overbought territory, but new highs continue to beat out new lows. Stocks seem happy to drift higher but we know some volatility is coming hard and fast.
Volume was pretty much on the light side Monday, makes sense really as we await word on Fed policy. We generally see big turnover during an heavy expiration week such as this one, the large volume prints will be this coming Friday. But, we should continue to match bullish volume trends with strong price action if that is the case.
Stocks had a rather small range as compression is building. What does that mean exactly? Think of a coiled spring that suddenly gets released. We could see a rather large move in either direction, so it is good to keep some protection if you’re going to play it from the long side. Support levels on the SPX 500 are at the 20 ma, around 5.592 while the Nasdaq has strong support just above 19K (100 day moving average).
The Internals
What’s it mean?
Pretty much a solid day for the internals, look at the VOLD, up for a 5th time out of 6 sessions. Very impressive move and the ADSPD continued to flow higher. Ticks were strong all session, check out the concentrated green. That bodes well for today, the VIX rose but finished off the highs of the session. Put/calls are still heading lower, that is bullish.
The Dynamite
Economic Data:
- Tuesday:Retail Sales, Industrial Production, Cap Utilization, Biz Inventories, Home Builder Confidence Index
- Wednesday:Housing Starts, Building Permits, FOMC interest rate decision, Chair Powell Press Conference
- Thursday:Jobless Claims, Philly Fed manufacturing, existing home sales, leading economic indicators
- Friday:N/A
Earnings this week:
- Tuesday:APOG, FERG
- Wednesday:GIS,SCS
- Thursday:DRI, CBRL, FDS, FDX, LEN, MLKN, SCHL
- Friday:N/A
Fed Watch:
It’s time for the Fed meeting this week, and all bets are on that we will see the first rate cut in four years since dropping the rate to zero to counter the aftermath of the covid pandemic. With supply chain issues and a flood of money in the system it was difficult to fight off inflation trends, but they are winning now and see a clear path towards a soft landing. The market is ahead of the Fed though and that could mean a sell on the news if they are not given what is expected.
Stocks/Issues to Watch
Federal Reserve – It is widely expected the Fed meeting will conclude embarking on a new and dovish interest rate policy. After nearly 15 months of extreme tight policy it seems the Fed is ready to loosen, but not as aggressively many would believe. Let’s watch the fed futures respond.
Options – A big expiration and rollover is upon us this week. We often see quite a bit of movement with futures and volatility during this triple witching time, let’s see if there is some opportunity to trade it.
