The Fuse
Equity futures are down as the market may be in need of a rest after a torrent of buying this week. One would have thought differently after Monday, but the bullish energy came out big this week, indices are up 4% or more so far. Next week is a big expiration on Friday and with markets at/near highs there could be some big moves happening.
Interest Rates are headed back down as the recent selling in bonds evaporates. Yesterday the FOMC cut interest rates, the fed funds yield is now at 4.5% and looks to be heading lower. The futures market is betting on another cut next month, the last meeting of 2024. If yields do not drop from here that will line up the yield curve into a flattish formation, which is typical bearish until the curve slopes upward. We’ll see how things go over the coming months but this move is encouraging.
Stocks were slow to respond to the US markets overnight, in Europe the STOXX index was flat, most other countries had negligible moves. The buck is on the move again, rising up .1%, German bund yields dropped sharply, 5bps while US treasury yields also dropped, .3%. In Asia, stocks in Japan were higher by .3% but Hong Kong and Shanghai were both losers.
Earnings for Axon last night were lights out fantastic. We also saw strong earnings from Arista and Bill.com, and the Trade Desk delivered stellar numbers but mild guidance. DraftKings beat but offered soft guidance, Affirm and Fortinet the same.
Markets continued their winning ways on Thursday with fresh new highs for the SPX 500 and Nasdaq. The price action remains strong but breadth once again was lean. Regardless, we always consider price movements as the most important indicator of them all. Today’s surge was mostly led by technology-related names, but the rally was widespread. Can the markets close out the week on a high note?.
Breadth was just okay once again, it seems sellers are lurking and waiting for the moment the market decides to catch its breath. The upside was 16 vs 11 to the downside on the NYSE, not all that impressive. The oscillators did still remain above zero, and confirmed a buy signal. We would like to see these push out to much higher levels and reach overbought. New highs again trounced new lows, this indicator now on a buy signal.
Pretty good turnover but not quite as strong as Wednesday, but we’ll take it. Good, healthy volume is a sign that buyers (or sellers) are interested. In a bull market, these come in fits and starts. While Thursday was not an accumulation day, we did have one the prior day, if they start to cluster there could be significant upside ahead.
The market continues to push forward and hence no testing of support levels. We do see 5870 on the SPX 500 as a strong area of support all the way down to 5680, in fact that entire range was a good block of action recently. Nasdaq is acting very strong but so is the Russell 2K, which actually gave back some gains yesterday. We see this having support at $225 but if there is more upside momentum this will make a run at $250 very soon.
The Internals
What’s it mean?
The internals were positive but not nearly as impressive as Wednesday. The VOLD was higher all day but you can see (top left box) this indicator remains below the recent highs. The ADD had a grand day Wednesday but a malaise yesterday, VIX fell sharply following the Fed announcement and is on a buy signal with a close under the 200 ma. Put/calls are coming down again, ticks were moderate but biased to the bullish side.
The Dynamite
Economic Data:
- Wednesday:SPX final US services PMI
- Thursday:Jobless claims, productivity, FOMC rate decision, consumer credit, inventories
- Friday:Consumer sentiment
Earnings this week:
- Wednesday:CELH, CVX, TEVA, TM, JCI, ARM, AMC, QCOM, ELF, APP, IONQ, CLOV
- Thursday:VSTR, GOLD, DDOG, HAL, HSY, MRNA, DKNG, ANET, SQ, RIVN, U, TTD, AFRM, FNET, PINS, ABNB
- Friday:SONY, IEP, FLR, NRG
Fed Watch:
Another Fed meeting is upon us and the Fed futures market predicts a cut after Thursday’s meeting. That is likely the case as the committee has no reason to disappoint the crowd, but debate about a December cut will certainly be heard. The job report Friday (poor) may be an anomaly, but if it is slowing that quickly a faster rate cut policy may be appropriate.
Stocks to Watch
Election – We have finally come to the day that can change the US. We should know how things turn out later in the week, the effects on the market and economy will be analyzed.
Federal Reserve – The seventh meeting of 2024 will take place this week, the committee is largely expected to cut rates once more, this time by .25%. That may not sound like much but with lower inflation it makes sense for the committee to bring down borrowing costs.
Earnings – It is another big week of earnings as the season comes into the halfway point. 1/3 of the SPX 500 reported last week and very little damage was felt. Many stocks reporting this week have strong chart patterns and formations, we’ll see if that continues to be the case.
