The Fuse
Equity futures are bouncing around here this morning trying to figure out a direction. New closing highs were printed on the SPX 500 and Nasdaq but it seems there is a worry out there of a substantial selloff, nobody wants to leave the market but they are wary of it.
Interest Rates are coming down a bit on the long end of the curve as short term maturities remain steady. Spreads on high yield/treasuries remain tight, no recession is seen here while we continue to believe no rate moves will happen at next week’s Fed meeting.
Following the strong showing Thursday morning stocks in Europe were down .6%, STOXX taking a hit thanks to losses in France and Germany. The FTSE also lost .4%, the dollar index rose up .1% while gold and silver were low. Crude oil rally continues. German 10 yr bund yields rose sharply, up 5bps while 10 yr US treasuries were up slightly. In Asia stocks fell, Japan off .9%, Hong Kong down 1.1% and Shanghai down .3%.
Earnings last night from Intel were okay but guidance off, the stock is down again. Deckers beat lowered expectations and guided up, this morning Centene was awful but HCA beat and raised, AutoNation did the same and is up modestly. Carvana also is rallying on strong earnings.
A mixed picture slanted towards bearish action yesterday, perhaps it was just the bulls taking a breather. No question the market trend is up but remember, markets do not go up everyday forever – it just seems that way! A little pullback is always okay and necessary at times, it just does not feel good when the market is going against your positions. Regardless, a new all time high was printed.
Breadth was poor but this indicator remains on a buy signal. Stocks fell from the start after printing the highs of the day early on, but we could see by the weakness in the small caps that the upside was going to be capped. Thanks to a lower VIX the markets did recover some, a resilient market that seems to be waiting for something to happen. Oscillators remain split, new highs still expanding.
Volume trends remain bullish however the dojis printed seem to indicate the markets are on thin ice and in thin air. Perhaps running out of fuel via the volume is going to set the markets back a bit or perhaps just some sideways movement. Whatever the case, a high volume sell day is not on the menu for the bulls and could be avoided.
The long awaited test of short term moving averages may actually be upon us, but it’s not going to be easy. It seems FOMO is taking hold as every pullback is attracting new money flows. For now, the indices remain firmly above that 20 day moving average, and when it tests that level – could be next week – there will be initial fear and panic. Something to buy? Could be!
The Internals
What’s it mean?
Poor numbers across the board for the internals in fact they were simply the opposite of Wednesday. But wait, the markets went higher you say? Well, not exactly. The VOLD and ADD along with TICKS tell the story here, with red all over the place. Put/calls even rose up sharply and the ADSP finished poorly. Just a modest pullback in the scope of a big picture bullish trend.
The Dynamite
Economic Data:
- Thursday:Jobless claims, PMI’s, new home sales
- Friday:Durable goods
Earnings this week:
- Thursday:AAL, BX, NOK, DOW, LUV, FLEX, UNP, NDAQ, KDB, HON, INTC, NEM, DECK, BYD
- Friday:CNC, HCA, AN, CHTR, TNET, SAIA
Fed Watch:
Not much on the calendar but Chair Powell will give opening remarks at a banking conference. The committee is in blackout period as they prepare for their next meeting coming up soon.
Stocks to Watch
Tesla – Earnings out this week for the big EV car maker as estimates are all over the place. Did Elon come back soon enough to make a difference and will he come up with some surprises?
Google – Also reporting this week, the big search company is working to diversify their revenues enough to show regulators there is no need to break up the company due to antitrust issues. The stock has been a poor performer and may start to catch up soon.
Volatility – We continue to live with a low VIX and that means the market is highly complacent. With all the worries in the world this makes the market that much more vulnerable.
