The Fuse
Equity futures are up nicely this morning, a strong bid in the market even with higher commodity prices, higher yields (bonds), higher dollar and slightly higher volatility. It’s an odd mixture but we’ll see how this resolves later in the day.
Interest Rates are up this morning as bond sellers hit the bid and take some recent profits. 2 yr yields are moving higher, worries about inflation are out there again. We still do not have the September labor report yet. High yield spreads are widening slightly this am, fed futures are coming off recent highs.
Stocks are pushing nicely higher this morning on some good turnover in futures. However, STOXX in Europe was flat, France was lower by .7%, dollar climbed .4%, gold ripping higher and is now very close to 4K, silver up 1% and crude oil higher by 1.5%. Strong move by commodities. Stocks in Asia were mixed, Japan up a robust 4.8%, Hong Kong dropped .7%. Yields were up, German 10 yr bunds higher by 4bps, so were US 10 yr treasuries.
Technically earnings season starts this week and we’ll hear from Delta, Pepsi and Levi’s, but we won’t really start getting a good read until the banks/financials step into the confessional the following week.
Will the government shutdown continue or will there be a resolution to get things back in order? That’s a good question, it seems the stock market is not flustered by the political shenanigans of our leaders in Washington. Been there, done that. More importantly is a big earnings season is nigh, and that means we’ll see if the recently large rally we have experienced is going to stick.
Breadth was positive Friday but this indicator still clings to a sell signal. It was about a week ago these generated and continue to plague the market bulls. Oscillators are still split, new highs are crushing new lows as this indicator remains on a buy signal. So, some divergences there.
Strong volume day for the bulls as they notched another accumulation session. Further, more time has passed from the prior distribution days, so there is less likelihood of damage. Yet, we would like to see the turnover expanding more on up days, especially those that are lopsided in favor of the bulls.
We continue to wait for the markets to pull back and find support levels. We’ve been mentioning the previous move down to the 10 and 20 day as a successful test, and that worked to help drive the markets up to new highs. With five up sessions in a row that leaves the indices vulnerable, though who knows when that next drawdown happens. We know the dip buyers are waiting.
The Internals
What’s it mean?
Solid internals on Friday with highs in the VOLD at end of session, but the ADD and ADSPD fell sharply. VIX was on a ride that day, TRIN fell which is bulls and the put/call ratio remains on a buy signal. Ticks were mostly green with buy programs spread most of the day. All in all a nicely bullish session to end the week positive.
The Dynamite
Economic Data:
- Monday:Fedspeak
- Tuesday:trade deficit, consumer credit, lots of fedspeak
- Wednesday:More fedspeak
- Thursday:Powell speech, jobless claims, inventories, fedspeak
- Friday:Consumer sentiment, monthly budget, Austan Goolsbee
Earnings this week:
- Monday:STZ
- Tuesday:MKC, PENG, SAR
- Wednesday:AZZ, BSET, RGP
- Thursday:DAL, TLRY, PEP, HELE, LEVI
- Friday:N/A
Fed Watch:
With the government shutdown still in place there are not many reports that can be released for analysis. But fed speakers are going to out in droves this week talking about fed policy, the economy, inflation and other topics. Pay attention to what Chair Powell has to say on Thursday.
Stocks to Watch
Bitcoin – The big crypto has been making a move recently and bringing other names up along with it. Some have been predicting a nice rally for Bitcoin into the end of the year, technically it does look ready to rip higher.
Gold – Hitting new highs last week in a stunning move up through 3,900 – we are watching for the 4K number to fall, eventually it gets there.
Volatility – The VIX remains low and that means stocks can rally but the market is very complacent here. That eventually gets paid back with some bearish action, it’s just not happening now. We enter a seasonally strong bullish period so the VIX may be going to sleep for awhile.
