The Fuse
Equity futures are up this morning as the bull rally continues. Yesterday’s very persistent rally was led by the small caps, and though we did not finish on the highs of the session the buyers are certainly living at all levels, dip buyer came back in after filling the morning gap. Things may slow down a bit next couple of days before the holiday.
Interest Rates are modestly higher after yesterday’s shake down in rates. The 10 yr yield plunged to 4.24% on heavy bond buying. A followthrough day would be important to keep this trend moving, small caps benefit from lower rates, so far this am IWM is about flat. Fed funds futures still see a 56% probability of a rate cut in mid December, the last meeting of the year.
Stocks in Europe fell sharply, down .6% on heavy turnover as sellers hit Germany and France rather hard. Gold and silver are bouncing back, nearly 1% higher as is crude oil, up a bit more than 1%. The US dollar rose .1%, US treasury 10 yr yield rose 2bs, in Asia stocks were mixed with Japan declining by .9%. Shanghai and Hong Kong were mostly flat.
Earnings last night from Zoom were good but guidance was a bit lighter than expected, Dick’s posted strong numbers this morning, Kohl’s missed and lowered guidance, they are replacing their CEO. Best Buy cut their profit forecast into the holiday season. Later today we’ll hear from Dell, Workday, Nutanix, Crowdstrike, HP and Autodesk.
Nothing like some followthrough in the markets after a solid week and no negative news from the weekend. The pace setter once again was small cap stocks, which really pushed higher after some early strength in bonds. Yields fell sharply as some bargain hunting ensued. That was really a nice bonus for small cap stocks, which finished better than 1.5% higher on good turnover. With only 2 1/2 trading days remaining in the week we’ll see if ‘turnaround Tuesday’ burns the new bulls or if we’ll have a continuation.
More solid breath now puts this indicator on a buy signal. Terrific strength all session long as there was broadening of this rally. Not only technology was strong but homebuilders and their ilk showed nice gains, like Home Depot and Lowes. When markets make new highs we also like to see breadth pushing higher as well to new highs. However, the oscillators are moving up the charts to a near overbought condition, so that will soon be a concern.
Turnover was very good on Monday, not typically the most active session of the week. With volatility down on a shortened trading week, markets still see some upside coming if the bulls can gain even more momentum. In addition, Bitcoin continues to pace the action for the markets (along with the small caps). We saw better volume in IWM, SPY and QQQ yesterday, confirming their moves higher.
As we see the markets move higher the support level distance becomes larger, too. When that happens the markets become vulnerable to some heavy downside action, but frankly that has not become an issue yet. We are in a seasonally strong period and as such dips are being bought, which makes it difficult to cling to levels. In other words, adjustments made on the fly. The SPX tickled 6K again today, I’m sure the bulls would like to mount a rally above that spot to solidify some support.
The Internals
What’s it mean?
Another day of solid internals, this is telling us why this market is so strong. It was only a few days ago however when we interpreted the internals as ‘in trouble’. That change here late last week, nothing better than following through on a Monday. Check out the strength again in VOLD, but the ADD slipped off the highs of the session, the VIX came down hard. Ticks were green most of the session but spread equally. Put/call raced lower and is now on a buy signal.
The Dynamite
Economic Data:
- Tuesday:Consumer confidence, noew home sales, Fed meeting minutes
- Wednesday:Jobless claims, durable goods, GDP first revision, Income/spending, PCE,
- Thursday:N/A
- Friday:N/A
Earnings this week:
- Tuesday:KSS, BY, ANF, M, DKS, BURL, ADI, MANU, DELL, WDAY, CRWD, AMBA, HPQ, URBN, NTNX
- Wednesday:GOGL, ARBE, CLGN
- Thursday:N/A
- Friday:FRO
Fed Watch:
No Fed speakers this week though the prior week had a slew of them, they seemed to be sounding the same cautious tone. Waiting on the data as usual. Tuesday we’ll get the meeting minutes and that will give us a clue as to how the discussion went on the last rate cut meeting.
Stocks to Watch
Volatility – We often see volatility fall off a cliff in front of a holiday. Friday 11/22 saw the vix drop 10%, there could be more down in volatility into Thursday.
Small Caps – These were the star performers last week, just a shade off all-time highs. If rates decline we’ll see this group posting even better numbers, driving positive breadth and pacing the rest of the market.
Bitcoin – Nearly tagging 100K Friday was a tease. We are likely to see much higher prices down the road, crypto currency is very strong and moving at a rapid pace. The gold rush is on!
