The Fuse
Equity futures are ripping higher this morning as the SPX 500 looks to pull off another new all-time high. Oscillators are back positive again with a bullish tailwind on seasonal trends it appears a move to 6K is imminent. Nasdaq is also strong this morning but the IWM (small caps) are showing some weakness in pre-market.
We are moving into the danger zone here on rates. While the last few sessions saw the 10 year drop below 4.1%, it remains stubbornly above 4%. If that is the range then fine, but frankly the range is likely to expand, bond volatility has risen. What’s it mean? higher rates ar going to be a snag for stocks, especially small caps which seemed to have found some footing.
Stocks are shooting up across the seas as Europe is climbing a bit, thanks to good earnings from TSM and a pending meeting/policy decision from the ECB. The US dollar is up again, crude is up slightly while gold is now ticking over 2,700 per ounce. The german 10 year bund is up 2bps, Stocks in Asia were down, Japan off .7% while Hong Kong and Shanghai shed 1% ore more.
Tremendous earnings from overnight on Taiwan Semi has this group moving sharply higher today. However, last night weaker numbers from PPG and CSX offset strong earnings from AA. This morning a bust from Elevance but mixed earnings from Travelers. Later today we’ll have ISRG, Netflix and a few others. Tomorrow PG, American Express, SLB and others.
Solid turnaround yesterday with good breadth and depth. The price action was strong for the most part, especially in the small caps and Industrials. The Russell 2K is nearly at a 3 year high and pushing towards an all-time high level, finally ready to join the other big cap brothers. Interestingly, rates were down which stoked a rally in small caps, but that was not the case Tuesday but the IWM did outperform. Something to watch, if the small caps rally on either situation.
Really good breadth, the bulls blew the bears out of the water with a 3-1 rout. This also turned the NYSE oscillator positive, an stunning development. This indicator is now on a buy signal, of course followthrough is key. New highs continue to dominate over new lows, this indicator also remains on a buy signal.
The cumulative volume hit new highs, turnover continues to build as stocks reach peak levels. Certainly there will be some selling at some point but with seasonal trends act as a tail wind there is plenty of opportunity to get long and buy the dips. That has been the activity of most investors over the past few months. An accumulation day is good but does not cancel out prior distribution until some time has passed.
Yesterday’s drop to support was good enough for the SPX 500 dip buyers. Today’s early pullback brought out some opportunity for those traders to add positions, considering the strong breadth and volume at the start of the day (thanks to the IWM, which finished above resistance and higher by 1.4%). Nasdaq is still plagued here by some indiscriminate selling, perhaps that will change end of the week. About two weeks left in the month, October is looking pretty green.
The Internals
What’s it mean?
We said yesterday ‘danger on the horizon’ if Wednesday was weak. Well, that wasn’t the case and if you see the internals you’ll understand way. VOLD climbed high, matching the strong showing last week while ADD also soared. Ticks were mostly green all session long, put/calls were lower while VIX also tanked hard. That indicator is on a buy signal. Small caps led the charge higher.
The Dynamite
Economic Data:
- Thursday:Retail sales, jobless claims, philly fed, industrial production, cap utilization, biz inventories
- Friday:housing starts, building permits, fedspeak
Earnings this week:
- Thursday:TSM, TRV, ELV, INFY, MTB, NFLX, ISRG, WDFC, MRTN,
- Friday:CMA, SLB, AXP, PG, RF, ALLY
Fed Watch:
More Fedspeak this week but not as much as last, when we had 15 speakers in total! Whew! The inflation reports last week were mixed but they still see the fed cutting at least once and likely twice before the end of the year. Last week’s release of the Fed minutes pretty much told the story there, rates have backed up to be more aligned with fed talk.
Stocks/Issues to Watch
Retail sales – With a huge jump in retail spending over the summer will this be cooling down before the holidays?
Earnings – Later in the week some big names will report earnings, and this will likely be a market moving event.
One thing to remember, you don’t want to be too short during earnings season.
Boeing – Not that it matters much, but Friday after the close the company snuck in their earnings results early, a huge loss and 17K jobs being cut. Who does this on a Friday night, like a massacre? The stock may be hit hard.
