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The Fuse
Stock futures are rising this morning, looking to erase losses from Wednesday’s drop. Today will be a half day of trading, the markets will close at 1pm EST and re-open Sunday evening at 6pm EST (futures). We often see erratic movement on a day with very little liquidity, but retail related names often get a close look.
Interest Rates are coming down and are now officially in a downtrend. How long that lasts of course depends on the data and the Fed in mid December, will they cut or not. The important 200 day moving average of the 10 yr lies at 4.208 and remains flat. Fed futures rose up and now portray a better than 2-1 chance of a rate cut in December. The 10 year would still be under the fed funds if that rate cut happens.
Stocks in Europe were flat all morning as many traders were taking the time away from the markets. Gold is higher again as is silver, crude oil up modestly before a big OPEC meeting. The dollar dropped .3%, natural gas futures down .5% while the German 10 year bund yield fell 1bp. US treasury 10 yr yields fell 4bps and continued its decline.
Earnings were small on Wednesday am and only a few out this morning, nothing too notable.
Wednesday was mostly a down session but it is hard to dispute this market trend. Without much volatility speak of there seems to be a buyer coming out from every hole in the wall. What is impressive though is the breadth (advancers) over the depth (volume). This is certainly the most bullish seasonal time of year and we often see stocks rally hard into year end. Just have some insurance just in case and be cautious..
Breadth was actually positive and that keeps this indicator on a buy signal. Certainly we might expect to see better price action but no doubt traders left early to start their holiday and let the rest of the market fend off the sellers. We saw price a tight price range established early but it was tech stocks that were in pain most of the day, with Nasdaq breadth terrible. The positive breadth was thanks to the outperformance of the small caps once again.
Volume was low as one would expect pre-holiday, so we’ll ignore the low readings this week. However, Monday starts a new month and there is plenty of important data to consider. We did see a bump in selling volume after the PCE number was released Wednesday, most largely ignored this big number but it showed inflation remains sticky.
A pullback from early week gains should not come as a surprise, and today’s short trading session with traders in a holiday mood could flip that around. We still see 5950 as good support for the SPX 500 which closed just under 6K. For the small cap Russell 2K, good support at 232 (IWM), but with this index at all-time highs and small caps under siege we could see a run past 250 this month.
The Internals
What’s it mean?
The internals were meh on Wednesday, not much to get excited about as it seems traders could not wait to get their holiday started early. Ticks were spread evenly, the VOLD barely moved but the ADD showed its old ‘true colors’, starting high and finishing low.
The VIX remains downward as we would expect during a holiday shortened trading week. Put/calls were elevated Wednesday.
The Dynamite
Economic Data:
- Friday:N/A
Earnings this week:
- 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!
