The Fuse
Equity futures are up strong this morning following a weekend of non-events. While the rally on Friday was bold the indices did finish off their highs of the session, today they are attempting to regain some of that lost ground. Keep and eye on volatility this week as it should be headed lower.
Interest Rates are moving lower this morning, seems word is out the Chair Powell is in favor of a cut in December (but may not be for one in January). Yields on the long end of the curve are down, 2/10 spread is lower and high yield is starting to kick in with tighter spreads. Fed futures see a 73% chance of hike in two weeks.
Stocks in Europe had nice gains, the STOXX up .6% with FTSE also picking up .4%>. In Asia stocks were mixed, Japan closed but Hong Kong up 2%. Gold is slightly lower as is silver, crude oil unchanged. The dollar index is flat. Yields fell in Germany and on the 10 yr US treasury.
Earnings have shifted downward, fewer big names now but some very important. This is a short week but we have Dell, Deere, Zscaler, Urban Outfitters, Ambarella, Agilent, Zoom, Autodesk, Dick’s and Abercrombie/Fitch.
Stocks rallied on Friday following a massive reversal Thursday on big volume. That heavy turn was pretty rare, only eight other times from up 1% to down 1.5% but all times led to higher gains the next day and week. We’ll see how it plays out though as we have a short trading week, where we often see traders FADE volatility, meaning they sell vol and the resulting action is strong positive futures movement (up).
Breadth finally had a good day though it was much better earlier in the session. The dominant move up following NVIDIA earnings came crashing in as breadth was weak on Thursday, but an oversold condition was enough to get some dip buyers off the sidelines. New lows continue to crush new highs and that will keep a lid on any market rally. Oscillators hit some deep oversold readings Friday as the opening gap was filled. Hard to see too much positive breadth here before the end of the year.
Volume was decent on this double witching expiration, equity options and index option both expiring end of day. There was quite a bit of movement but lower volatility as the VIX was cut down to size following a surge higher midweek. Expect to see volume levels recede during this shortened trading week, especially Friday as it is only a half session.
Support levels were tested with the 100 day moving average on the SPX 500 Thursday but we are not out of the bear-infested waters just yet. If Friday’s bounce becomes a failure look for that 100 ma to again be tested, if that gives way the 200 may is the next target, and that is way down near 6,170 or so. For now, we’ll say 6500-6550 are a good safety area of support. As for the Nasdaq, in a similar situation but sitting right on the 100 ma currently.
The Internals
What’s it mean?
The internals were impressive, the VOLD especially ripping higher end of day. We have not had a day like that in some time, good to see for the bulls. Though off the highs, the ADD did finish strong and the ADSPD had a trend up day, nicely done. Put/calls still remain elevated, the VIX was slammed down hard and is now on spike peak buy signal (Larry McMillan), ticks were mostly green as buy programs flooded the day. As always, followthrough is key.
The Dynamite
Economic Data:
- Monday:n/a
- Tuesday:Retail sales, PPI, BIZ inventories, consumer confidence, housing index
- Wednesday:Durable goods, jobless claims
- Thursday:n/a
- Friday:chicago biz barometer
Earnings this week:
- Monday:ZM, SMTC, KEYS, ALCO
- Tuesday:BABA, NIO, ANF, ADI, KSS, BBY, PONY, BURL, DELL, ZS, ADSK, AMBA, WDAY, PD, URBN, NTAP
- Wednesday:DE
- Thursday:N/A
- Friday:CHA
Fed Watch:
We heard from several fed speakers the past couple weeks and John Williams of NY Fed seemed quite influential. The head of this important bank seemed to indicate he was willing to vote for a rate cut at this next meeting even if more data is yet to be seen. That is not too surprising, Williams is seeking the Fed Chair along with some others. There is no doubt some contentious comments will be made during the next meeting, and maybe Chair Powell will be able to stick to a consensus decision.
Stocks to Watch
NVIDIA — After posting very strong earnings and guidance, the big chip company fell back to earth late this week but is now establishing a range. We may not see too much movement here to the end of the year as volatility recedes, but suffice to say big money managers may want back in end of the year.
Crude Oil – Don’t look now but crude is firmly below $60 per barrel and not looking bullish. This week estimates for oil demand were slashed, meaning supplies are too high and that could mean negatives for the economy. Prices down yes, but oil is a key economic indicator.
Name – event, level, your expectation
