The Fuse
Equity futures were on a ride overnight. ES futures fell all the way to 6748 but bounced sharply from there. At that low the futures were down 53 more handles after losing 72 on Tuesday! Market volatility is back, liquidity is weak.
Interest Rates are not moving much this morning though they have started a slow rising trend. High yield is troubling, spreads are widening as well. The spread between 2’s and 10’s is starting to rise, though it is not dangerous yet. Fed futures are steady.
Stocks look soft this morning, influenced by declines in Europe and Asia. Europe down .3% paced lower by France and Germany, Japan got smoked, down 2.5% while Hong Kong and Shanghai were mixed. The dollar fell .1%, gold is flying higher but is back below 4K, silver slightly higher. Bitcoin tested 100K and held. Yields in Germany and the US 10 yr are slightly down.
Earnings last night from AMD were good but investors took some profits. Pinterest was a disappointment and is down sharply today, Arista also failed to meet expectations. Axon had a mixed quarter but is getting slammed anyhow. McDonalds missed their bottom line this morning, Unity with a strong report and guidance. Tonight we hear from RobinHood, Applovin, Arm, Qualcome, Elf, AND Snap.
An awful session for markets yesterday as the sellers came out in droves. The technicals are now pointing lower and with some downside followthrough today the trend changes. Testing the 20 day moving average was at a minimum but the 50 day is also begging to be touched. Not much other than earnings to support prices here, even strong numbers are not being rewarded. Worry time here.
More bad breadth as this indicator remains on a sell signal. Strong selling hit the markets as the a/d line was again in the red, the oscillators are negative still but not quite oversold as of yet, that could be coming soon. No question the breadth has been signaling this poor action for a few weeks now, we’ll have to see if selling continues or the dip buyers show up. The former rather than the latter is the smart bet here.
Strong turnover yesterday as the bears notched a distribution day, these are starting to cluster. That right there is a red flag warning, and a few more of these will signal a change in the trend. Nobody wants to believe the market can be bearish during the seasonally bullish holiday period, but here we are – and that could be happening.
We’ve been calling here for some testing of lower levels, the first one today was the small cap IWM. That index fell hard and settled below the 50 ma for the first time since April. A followthrough day will signal this ETF is in an intermediate downtrend. That’s not a fait accompli but it sure does complicated things for the bulls. Given the rich valuation and rise in the Nasdaq we would not be surprised to see more downside here in this index even as Tuesday was a very sharp down session.
The Internals
What’s it mean?
Horrendous VOLD as volume breadth was atrocious. Nothing positive in any of the indicators, the VIX rose up smartly and even the put/call rose up nicely, ticks were red most of the day and showed the power of sell programs. ADD was weak as was ADSPD, but not horrible. The internals have been telling us for days there were problems, and finally they are coming to light.
The Dynamite
Economic Data:
- Wednesday:ADP, PMI, ISM
- Thursday:5 fed speakers, maybe some economic data
- Friday:Potential for jobs report, consumer credit, sentiment, fedspeak
Earnings this week:
- Wednesday:NVO, HUM, MCD, U, CCJ, BCO, AES, HOOD, IONQ, APP, AMC, BROS, QCOM, ARM, SNAP, FIG, ELF
- Thursday:COP, BCE, OSCR, VST, AZN, DDOG, ASPN, SBD, MRNA, TTD, OPEN, MP, IREN, SOUN, DKNG, INOD, ABNB
- Friday:CEG, WEN, FLR, SIX, BAM, DUK, HLLY
Fed Watch:
Last week’s Fed meeting was quite interesting. There were two dissents among the voters, one wanted no rate cut, another wanted 50bps. The committee gave the market what it wanted but Chair Powell refused to yield to market pressure for a December cut, instead saying it was ‘not a done deal’. That send the fed futures tanking and the market did as well, but it certainly came roaring back. It appears the markets are accepting the path of rates, whether fast or slow.
Stocks to Watch
Gold and Silver – Precious metals continue to do well with markets also strong. They could continue much higher into year end, and with strong momentum why not?
Bitcoin – With two months left in the year the shining alt coin could be poised to make a big move to end the year in style, at new highs. This week may start the process.
Earnings – Very strong earnings reports this quarter and this week will be the biggest one yet, more companies delivering that last week. We’ll get a good read on market valuations after this week is over.
