The Fuse
Equity futures are rallying sharply today with the industrials and small caps leading the way. All indices are at new all-time highs, the Russell 2K really looks strong and ready to make a bold move higher. Bitcoin moved above 81K for the first time and is rallying the markets with it.
The bond market may be closed today but yields are on the rise, which means bondholders are selling. We have seen rates trading in a range over the last few weeks, settling in just under 4.5% on the 10 year. As a reminder, the fed funds rate already at 4.5% and likely dropping much more over the coming year. Fed funds futures are pricing in an aggressive fed policy, but we’ll let the data tell us what their pace will be rather than the market.
US futures have been up since Sunday evening, stocks in Europe rallied smartly, up 1% overnight in the STOXX index, the dollar also climbed higher while France and Germany both gained ground. Crude oil is off while gold is down also, about 1%. German 10 yr bund yields fell 2bps while the 10 year treasury rose up a couple. In Asian stocks were mixed, Japan barely up but Hong Kong down 1.5% while Shanghai was up .5%.
Earnings are into a new phase, but no less important. We’ll hear from Cisco, Home Depot, CAVA, Spotify, Applied Materials and Shopify among others. Retail sales will be out later this week, setting up for retail earnings over the next couple weeks.
After last week’s barrage by the bulls there is no rest for the wicked. Inflation reports and retail sales for October will be out this week and a dose of earnings as we shift to phase 2. We’ll also hear from many Fed speakers and Chair Powell this week. Monday the bond market is closed in observance of Veteran’s Day but the stock market is open.
Breadth was good one more time but not great, that has been the theme for most of the month. We did have that rout on Wednesday but that was not the huge breadth we like to see, Tuesday was much more substantial (better than 4-1). Nonetheless, oscillators are still on a buy signal, new highs are trouncing new lows and that is bullish.
Volume was a bit more subdued than earlier in the week, that makes sense after the crazy turnover we saw on Wednesday. The Industrials led the way in volume, certainly though volume trends are bullish across the board. The internals related to volume VOLD was slightly lower on Friday after shooting higher the previous four sessions, probably a rest is due.
Support levels remain quite a bit lower and that is becoming a concern. Not that the market needs to fall back here, but the more stretched we get from support and moving averages the tougher it will be to hold prices up. If that’s the case, we’ll have some very swift and sharp drops that will bring doubt into traders/investors minds about the current rally. For now, even a pullback is a buy the dip opportunity.
The Internals
What’s it mean?
Internals were meh on Friday. The VIX continues its descent, ticks were mostly green as the buy programs were stacking up. Put/calls also retain their bearish look, that indicator is bullish while the VOLD barely budged. The TRIN did spike up which means the volume was not confirming the bullish move in accumulation/distribution, we’ll see if that corrects back down today.
The Dynamite
Economic Data:
- Monday:N/A
- Tuesday:NFIB optimism index, three fed speakers
- Wednesday:CPI, Four fed speakers
- Thursday:Jobless claims, PPI, Fed speakers (including Chair Powell)
- Friday:Import prices, Empire State Manufacturing, Retails sales, industrial production, cap utilization, NYF President John Williams
Earnings this week:
- Monday:MNDY
- Tuesday:AZN, HD, IAC, MOS, SGRY, THS, TSN, SWKS, RXT, SPOT, CAVA, SOUN, OXY
- Wednesday:CYBR, BZH, CSCO
- Thursday:DIS, AMAT. POST, JD, AAP
- Friday:BABA, BKE, FL
Fed Watch:
The committee delivered a big rate cut last week, and now the market is focused on December. The futures market sees a strong possibility of this happening, but the data is going to need to come in as hoped for. This is a huge week for Fed speakers, and Chair Powell will be heard as well along with some other important names. Interesting they are all coming up with some important inflation data.
Stocks to Watch
Nasdaq – New highs for this index as it is now taking taking the lead. Remember in 2023 this index was up 53%. That is not likely achievable again but having the power to bring the other markets up is a huge advantage.
Tesla – After the election results, Elon Musk’s company really stepped on the gas and moved higher. The all-time highs are about 30% away but this stock has incredible momentum and could certainly make a run there before year end.
Inflation – With CPI and PPI readings due out this week, the expectations are for the core to continue dropping. The Fed has made great progress in bringing down prices but more work is needed. Policy is still restrictive, but with better inflation numbers the committee will bring rates down faster.
