The Fuse
Stocks are rebounding a bit from a deep oversold condition, trying to shake off a rough start to the week. The damage that has been done to the uptrend is notable as all indicators we follow are now bearish. But if the selling abates there could be a swarm of bulls just ready to step in and buy up this market.
Interest Rates are moving slightly lower this am as bond players continue to position before the holidays and the next fed meeting. That’ll be in a few weeks, today we should get the minutes of the latest session later on. Fed futures rose up again but it is still a toss up whether they cut in December or not. High yield continues to bounce around in a range but if they catch a bid we could see the markets moving upward again.
A mixed picture for the markets worldwide, in Europe the STOXX fell .2% led by similar losses in France and Germany, the FTSE also down .2%. The dollar index up .1%, gold higher by 1% and silver is ripping through with strong gains, cruide oil down below $60 again. Asia was mixed too, with Japan down .3%, Shanghai up .2% but Hong Kong down .4%. Yields in Germany and 10 yr US treasury both up 1bp.
Earnings this morning from Target were ugly as expected, Lowes actually printed a good quarter and guided up. TJX also with strong earnings and guidance, WIX dipped and fell on strong volume. Later tonight of course we have NVIDIA earnings and Palo Alto among a few others, then tomorrow is Walmart, ZIM and a. few small names.
Another miserable day for the bulls have left them wondering if the stock market will ever go up again! It is that sort of despair that will help the market finally bottom, but we really are not that close yet. The dip buyers have been burned here a few times, but it is when they stop trying to pick at these down moves is when we’ll have something much more prominent, and that may come when investors sour on the markets at the right moment.
The breadth indicators were actually positive Tuesday following an atrocious Monday. Does that mean the markets are in the clear? Hardly so, just took one step away from the burning building is all. There is really nothing bullish about breadth here, but the oscillators sure got to a juicy oversold reading yesterday and the markets did bounce nicely, just not into positive territory. Why did the a/d stay positive? You can thank the IWM for that, the only index in the green, which carries the most weight for breadth.
Distribution day again as the bears were not messing around. The industrials sported their biggest print since April. It was not bullish, in fact a followthrough day here makes the chart look quite bearish. Good volume during the day on the IWM but it did not matter, it was accumulation barely, just not influential to the rest of the market. More distribution day clusters are not what but want to see.
Testing lower levels as we mentioned yesterday is needed and appropriate even if it feels bad. We are not in bull market mode in the short term right now, in fact the bulls are trying to hang on here before chaos hits. If the 6550-6500 range is tested and holds this week, which means markets will be oversold then we might have a nice rally attempt.
The Internals
What’s it mean?
Not often you see a positive internals when the markets get wrecked as they did, but that happened Tuesday. No turnaround Tuesday for the bulls, but the VOLD was higher, thanks to the green IWM. ADD clocked in barely positive, but ticks were red and more put buying, look at the rise in the put/call ratio. VIX remains elevated and that may continue on for a bit longer. NVIDIA earnings today, we’ll see how the market responds.
The Dynamite
Economic Data:
- Wednesday:Philly Fed, housing starts, trade deficit, fed meeting minutes released
- Thursday:September labor report, existing home sales, leading indicators, fed speak
- Friday:More Fedspeak, SPX pmi, consumer sentiment
Earnings this week:
- Wednesday:TGT, WIX, TJX, BLSH, LOW, GDS, ICCM, KC, VIK, WSM, NVDA, PANW, CPA, JACK, BV, CRNC, HI
- Thursday:WMT, ZIM, SCVL, ALLT, WMG, VIPS, BULL, VEEV, CPRT, GAP, ESTC, UGI, INTU, TEN, POST, ROST
- Friday:BJS, VFS, MNSO, FRO, AZIA
Fed Watch:
Lots of concern that inflation is starting to run hot. That has spooked several fed members as they offer a ‘wait and see’ approach at the final meeting of the year next month. Can the committee resist the market’s desire to cut one more time? If we look at the 2 yr the market there is saying ‘slow your roll’ while fed funds still expect a cut, it’s only 50/50 now. We may see a change in the odds later in the week as more data is released.
Stocks to Watch
NVIDIA — We have to pay attention to the ‘King’ this week, reporting earnings after the close Wednesday. Lots of interest in this name but they can also pull up other semiconductor and AI-related names, too.
Bonds — It’s possible we get several data releases this week and that might move fixed income. The equity markets are mostly oversold here so any lack of bad news is going to stimulate buyers.
VIX — I’m watching the VIX closely this week along with nasdaq volatility, the VXN. We have seen a rise here as many are getting uncomfortable. Perhaps an opportunity is going to open up of the dip buyers step in. Else, just expect more selling to drop the market further.
