The Fuse
US equity futures are a bit soft this morning following some news out of China that regulators are investigating NVIDIA for anti-competitive practices (likely in retaliation for bans the US put in place last year). Seasonal trends are still bullish so perhaps we see the dip buyers step in and shrug off this small sell off.
Interest Rates are rising up as inflation worries continue to permeate. We may see a hotter CPI this week for November but investors need to tawke it in stride, it is probably due to better growth in the economy. Even as expectations are for higher rates the fed futures market is still expecting a cut next week. Barring any shocking inflation reading this will probably happen, next week’s projections will be interesting to read.
European stocks were up overnight but erased those gains over uncertainty in the Middle East and S Korea, but were encouraged by news of stimulus likely coming from Hong Kong. Stocks from Asia were mostly higher, crude oil gaining ground as did gold and silver. US 10 yr yields were higher overnight. Later in the week European Central Bank policymakers will set interest rate policy, likely to ease policy again.
Earnings calendar this week is small but has some important names releasing their numbers like Oracle, Costco, Broadcom, Adobe, Macy’s and Autozone.
Sentiment and seasonality continue to push the everyone into the markets from the sidelines. There is really no other way to explain it, even after Chair Powell indicated the Fed is likely to step back and ‘slow their roll’ on rate cuts, the jobs report came in strong and still the market is expecting a cut in about 10 days.
Some inflation data this week could sour that position though, we have to be aware.
Breadth was poor again Friday even as the market bounced nicely. The Industrials however were weak all session long, perhaps that changes today. Further, small caps (IWM) finished off their highs and have a doji on the chart, an inside day – a sign of indecision. Oscillators are mixed with the Nasdaq positive and NYSE negative. That sort of divergence does not last too long.
Volume levels were strong on the QQQ and SPY, hence another accumulation day racked up. That is meaningful, especially during times when volatility remains low. With a low VIX and markets running higher on better volume, there is clearly no fear of the markets moving lower. That can be dangerous of course, with high complacency but for now the momentum of the market is bullish.
The indices like the SPY and QQQ continue to stretch beyond their short term moving averages. Again, this is meaningless until it matters, remember the tops/bottoms game is a useless exercise to try and predict. As for finding support the best we can do is look for levels where markets fell and found buyers, draw trendlines or simply use moving averages. When the markets race up as they have been doing, using shorter term moving averages is useful.
The Internals
What’s it mean?
Weak internals again but that has been the case all week long. For the price action it has not made a difference. The ADD started high and crashed down, the VOLD also pretty weak. The VIX however was crushed, down sharply and finished below 13%. That is a dangerously low level, but not all that bearish yet. It is when VIX starts to rise that things get unhinged. Ticks were mostly red, lots of sell programs hitting.
The Dynamite
Economic Data:
- Monday:Wholesale inventories
- Tuesday:NFIB optimism index, US productivity
- Wednesday:CPI, federal budget
- Thursday:PPI, jobless claims
- Friday:Import Prices
Earnings this week:
- Monday:ORCL, AI, MDB, HQY, CASY
- Tuesday:AZO, OLLI, ASO, FERG, JOUT, GIII, GME, SFIX, PLAY, SKIL, SPWH
- Wednesday:M, VRA, ADBE, NDSN
- Thursday:CIEN, LQDT, AVGO, COST, RH
- Friday:N/A
Fed Watch:
Fed speakers are quiet this week as they prepare for next week’s meeting. This past week a Dealbook interview with Chair Powell revealed his hesitancy for being aggressive in cutting rates. The committee likely shares this sentiment too, but more data this week will help determine the path forward.
Stocks to Watch
Amazon – This stock was strong last week after their AWS event. We’ll see if they continue to make new highs, the shopping season is here at it usually means Amazon is on top of its game.
Inflation – With the November CPI/PPI this week, it’ll be important to analyze the numbers to see if inflation remains sticky or is actually falling.
The committee is more likely to favor a pause even if they do cut rates in a week.
Bitcoin – The crypto hit a milestone last week, tagging 100K for the first time. The momentum and liquidity is ver strong with Bitcoin and could lead to much higher prices in the short term, perhaps up to 125K.
