The Fuse
Equity futures are rising early this morning on this final day of the week. That is no guarantee markets move higher, we should see quite a bit of volatility on this expiration Friday, many LEAPS will expire today.
Interest Rates are modestly higher across the curve this morning as fixed income investors seek answers to the increase in inflation. No doubt more inflation in the coming months will hurt bonds and cause yields to rise. The 10 yr remains relatively calm around 4.2%, high yield still very strong with tight spreads, and fed funds are steady, not looking for a cut at the January meeting.
Stocks in Europe were off slightly overnight, FTSE down modestly. In Asia a down session with Nikkei .3% and Hong Kong off .2%. Gold is down slightly, silver down roughly 2.5% in volatile trade. Crude oil is rebounding and pushing towards $60 again. The dollar mostly flat.
Earnings this morning from some regional banks like PNC, state street, Regions Financial M&T.
A bounce back from the recent selling, but finishing near the lows of the day was not on the menu. Still, with another day of trading here before the holiday weekend there could be a nice bump up. No question yesterday’s rally came as a bit of a surprise, the SPX 500 is not far off from 7K and could get there in days, if not today.
Another good day of breadth, better than 2-1 positive has this indicator strongly on a buy signal. Even the cumulative volume breadth is hitting new highs, and when that happens market highs usually follow. So far that is the case for the smail cap Russell 2K and nearly the Industrials and SPX 500, perhaps we’ll see it happen for all the indices sooner rather than later. New highs crushing new lows, oscillators bullish.
Up day for the indices but only one accumulation day, that was for the Industrials. We like to see an expansion of volume on up sessions following a down day or two, but that did not happen. Rather, there could be some good momentum heading into next week after all the January options expire today.
Just maybe that low on Wednesday was the launch pad the bulls had been looking for. Ideally a pullback followed by an up session needs some followthrough, we have the makings of a nice morningstar pattern, but another day up would cinch it. Strong support is much lower than current levels but the moving averages are definitely catching up to the price.
The Internals
What’s it mean?
On a roll. That’s the internals, though not as strong as earlier in the week but still very bullish and healthy. Ticks were green most of the day, save for the end when a few sell programs hit the last couple of hours. VOLD and ADD finished strong as did ADSPD, put/calls bumped higher and remains on a sell signal. VIX was cookin’ to the downside most of the day but did rise up, expect to see more volatility selling today.
The Dynamite
Economic Data:
- Friday:industrial production, cap utilization, Barkin and Jefferson speak
Earnings this week:
- Friday:RF, STT, PNC, MTB
Fed Watch:
This is an important week for the fed, not for decision making but because so many speakers are out talking about fed policy and the economy. Seems the only one NOT talking is Chair Powell, but with so much division at the time it seems relevant to listen to every participant’s view and where they stand. The first meeting with some new voting members is end of the month.
Stocks to Watch
Silver and Gold – Again, the metals are on fire and pushed to highs last week. Seems the momentum is strong here and that could last for some time, pullbacks have been buying opportunities.
Crude oil – Since last week’s invasion of Venezuela the price of crude only rose up modestly. That should change soon, futures market sees higher prices soon and with any supply disruption that will happen quickly.
Banks/Financials – Kicking off earnings season are the big banks this week. Did they run too far? It’s possible, but earnings should be fantastic anyway.
