The Fuse
We made it to Friday, and if the overnight session is any clue we should probably buckle up for safety. The markets dipped sharply early morning but bounced back hard, market volatility rose to nearly 29% but has backed off considerably. Options expiration today.
Interest Rates are falling again, picking up where they left off yesterday. This could be more a flight to safety as some cracks start to appear in banking (regionals), or could be just a one-off. Some banks have talked about bad loans, and if that story spreads there could be credit concern.
Stocks across the pond were down sharply overnight, the STOXX dropped 1.4% led down by France and Germany, the FTSE lost the same 1.4%. US dollar fell again, off .1%. Gold made another new high, it is up .3%, silver is down more than 1% and crude oil is flat. Asia was negative too, Japan down the same 1.4% but worse gains in China, Shanghai down 2% and Hong Kong off 2.5%. Yields fell in Germany, down 4bps and in the US 10 yr treasury yields down 2bps.
Earnings last night from IBKR and CSX, both with a good beat but only CSX is advancing. Strong numbers this am from AXP and SLB but the latter warned about revenue. More regional banks are reporting today, the KRE ETF was down sharply yesterday but is reboundeding.
Stocks fell hard as some geopolitical talk got in the way of the bulls’ plan for higher prices. What seemed like another routine followthrough day turned into a breakdown from the highs. The selling was ignited from some ‘war’ news, but actually small caps were leading the charge lower, the IWM down more than 2% on the day.
So much for a positive breadth day, the bulls jut could not string together a second higher session. That’s unfortunate, there was a chance to turn this indicator bullish but all for naught. Oscillators are back in negative territory, new highs sill expanding but at a slower rate.
Pretty intense selling took the volume levels higher and we experienced another distribution day. That means big money selling was the tone, and with professional selling today there is a small cluster of these building, that’s eventually going to be bearish.
Are we going to test that 50 ma one more time? The industrials did earlier this week and last Friday, the SPX and QQQ just missed it. Maybe we’ll see some more downside and a good bottom made before turning back up.
The Internals
What’s it mean?
After a strong internals day, just miserable for these indicators. VOLD and ADD back to their losing ways, with both indicators closing on the lows of the day. VIX spiked again, hitting levels not seen since April, that is worrisome. ticks were mostly red, so it was a winning day for the bears. We’ll see if that continues, the bulls are sitting quite vulnerable here.
The Dynamite
Economic Data:
- Friday:Housing starts, building permits, industrial production, cap utilization, import prices
Earnings this week:
- Friday:ALLY, SLB, STT, AXP, RF, TFC, HBAN, CMA, ALV
Fed Watch:
Lots of fed speakers this week coming out to talk about the economy. This will like be the last big week of fed speakers before the Oct 29th fed meeting, which seems to be one where the committee will cut rates one more time. No doubt some will be talking tariffs again along with the government shutdown, which is likely to be a drag on growth.
Stocks to Watch
Banks – This group has been weaker of late but that is perfect timing in front of earnings. Whenever the financials rally before earnings it usually means downside, we have the opposite situation here.
Tariffs and China – A mid afternoon swoon after President Trump said 100% tariffs on China starting November 1. If this is just rhetoric, a threat or something real we will soon find out after China responds. More uncertainty.
VIX – A huge move in volatility on Friday, perhaps a bit too much but we’ll see how the market responds on Monday. There is nothing wrong with a little fear but if it continues then it could be problematic.
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