The Fuse
Equity futures are soft following a challenging session overseas. Japan fell a bit but stocks wobbled a bit more before then, still showing a bit of resilience. The PCE along with spending/income will be released at 830am this morning and may move markets.
Interest Rates are lower today as the 10 yr’s recent push towards the key 4.4% level is off for now. Still, that level is like kryptonite, when yields rise it is bad for stocks and a sharp drop ensues (last three instances). Fed futures pricing in about 2 1/2 rate cuts in 2025, which seems far too many given the data on
inflation and growth.
Stocks look to start with a downward bias after a modest decline in Europe, France and Germany the culprit down .3% and .5% respectively. Gold is ripping higher, above $3,100 per ounce for the first time, silver up but crude oil flat. The US dollar also flat. German 10 yr bund yields fell 6bps, US treasury 10 yr yields down 4bps, but Asian stocks were hit hard, Nikkei down 1.8%< Hang Seng down .6% and Shanghai off .7%.
Earnings from LuluLemon were good as they beat across the board but guidance was suspect. The stock is getting hit hard. in the pre-market.
In what appeared to be a followthrough day to the downside with lower highs, lower lows the bulls came in to save the day – somewhat. No question it was a down session but off the lows the markets printed a long legged doji, a day of indecision. What’s it mean? Well, buyers are stepping in at Wednesday’s lows but not willing to hold for too long above 5,700. That is the range we are looking at here for now 5,600-5,700 on the SPX 500.
Breadth was weak again and now this indicator is on a sell signal. All the hard work that was done over the past few days is all for naught. Can the bulls regain control? Sure, but seasonal factors and sentiment are pushing back against them making progress. Perhaps moving to a new month Tuesday will help matters, the oscillators are back into negative territory and new highs are just not expanding much.
We have had some sobering volume prints this week. Not surprising after last Friday’s monster volume print (expiration day). What does it mean? Not much, especially since we are following the price action FIRST and foremost. Is higher volume important? Sure it is, but more meaningful when the markets are breaking out. That is not the case right here, in fact we find the indices carving out a range. That is not a place where buyers or sellers are interested in making a comittment.
Not much changed other than a lower high and lower low in the indices. The Nasdaq and Russell 2K fared the worst and reflect the poor sentiment. Though we have talked recently about being a contrarian when sentiment is dour, this is just not the time to be bold. Hence, remain more sidelined unless/until a breakout happens.
Support on the SPX 500 comes in at 5,500 while the Nasdaq has better support way down at 19,200.
The Internals
What’s it mean?
Another messy day for the internals. Yes, the SPX 500 finished off the lowest levels of the day but the internals were weak all session long. VIX did rise up modestly, ticks showed plenty of red while the VOLD and ADD continued to bleed. put/calls rose up again, this indicator is on a sell signal. This action sets up for a very weak day coming up, especially if tariff news is out to prep everyone for April 2.
The Dynamite
Economic Data:
- Friday:income/spending, PCE, consumer sentiment
Earnings this week:
- Friday:IPA, SLE, ZSPC, LIQT
Fed Watch:
The Fed came and did their thing last week, deciding to keep rates where they are and not offering too many clues as to their intentions. They did talk about starting to put an end to the QT program, reducing their sales of bonds to prevent a major liquidity crunch. As or inflation, Chair Powell believes tariffs will be a drag on the economy and bring up inflation, at least in the short term. A couple of fed speakers out this week talking up the economy.
Stocks to Watch
Banks – Financials have started to show better relative strength. No doubt they will be the leaders into the new month as earnings season gets underway in April. Top of the charts is JP Morgan but we will also be watching Goldman, Morgan Stanley and Citigroup as those names rally to the 20 day moving average.
Market Volatility – The VIX continues to be the story of late. The fear index has been on the rise lately and remains stubbornly high. However, release of the Fed notes last week pushed volatility sellers to work the VIX downward. Uncertainty over tariffs keeps a bid in the VIX though, we’ll see how much movement in the markets happens./span>
Tariffs – With the April 2 deadline looming towards across the board tariffs on other countries, we still have some uncertainty whether these are going to take hold or not. That is causing some angst but when the deadline passes (assuming it is not extended) we will have more clarity.
