The Fuse
Equity futures are ripping higher by 2% or more this morning as markets come off a rare oversold signal. The oscillators tagged extreme downside readings very quickly (over 3 sessions) and are now due for a powerful rally. It may be a strong risk on day but requires some followthrough.
Interest Rates are higher again as the bond market contemplates growth vs higher inflation. We’ll have a reading on Thursday/Friday of inflation and that will give us an idea if Fed policy is starting to shift towards a more dovish posture. Fed funds are expecting 5 rate cuts this year which seems quite bold and egregious.
Stocks across the globe are rebounding sharply as is US futures. In Europe the STOXX gained 1.2% on heavy volume led by France and Germany, with robust gains. Crude is slightly higher but gold is ripping, nearly up by 2% while silver is also rebounding. German 10 yr bund yields were off 2bps, US treasury 10 yr yields down 4 bbps, Stocks in Asia were up with Japan higher by 6%, Hong Kong and Shanghai higher by 1.8% and 1.6% respectively.
Earnings from Levi’s were better than feared. We’ll hear from MAMA, AEHR and Delta tomorrow am.
Overnight futures Sunday looked like more of the same from late last week. A heavy dose of selling spilled over into markets and suddenly the fear was gripping everything other than stocks including bonds, gold, oil, silver and bitcoin. One thing to know is when there is nowhere left to hide that often means a bottom for the markets is not far off.
Breadth again was horrible as this indicator is now deeply oversold after just a few sessions. It was a rout from the start, at one point better than 9-1 lopsided sell/buy stats, but that improved a bit yet the bears still won the day, finishing 5-1 negative. Oscillators reached a deep oversold reading but are due for a powerful rally attempt that might happen within a couple of days. New lows just trounced new highs, that indicator remains on a sell signal.
More heavy volume prints yesterday as the sellers took advantage, dumping stocks again hand over fist. Stocks are very clearly in a bear market though the officially call is not yet being made. That does not mean we won’t have rallies, remember volume prints to the upside can be heavy during bear markets, too. We would just tell you to use caution and not rely on one tool to help guide your trading. Volume is important but price action is king.
Lower levels were tested again, the SPX 500 traded much of the day below the 5000 level and did break its 52 week low from last April, but did rally back some in an extremely volatile session. No question this is bear market behavior and will be for some time. Nasdaq, for its part pulled down below 17K and traded there a bit before an about face later in the day, closing modestly green. Volatility remains elevated but well off the highs of the session. Could see some rallying here next few sessions.
The Internals
What’s it mean?
An amazing day for the internals, the market was crushed but these indicators were not as bad as feared. Clearly they show a down move occurred, ticks were spread out however, divided between green and red while the put/call took a nosedive, still printing over 1. VIX was much higher early in the day and while it did finish up, well off the highs. VOLD and ADD were down but did not press below Friday’s weakness. Closing a bit better than the start of the session.
The Dynamite
Economic Data:
- Tuesday:NFIB optimism index
- Wednesday:wholesale inventories, Fed meeting minutes
- Thursday:jobless claims, CPI, Chicago Fed Pres speaks
- Friday:PPI, consumer sentiment, NY Fed Pres Williams
Earnings this week:
- Tuesday:TLRY, RPM, WDFC, MAMA, AEHR
- Wednesday:DAL, SMPL, THTX, STZ, PSMT, RELL, TBBB
- Thursday:KMX, BYRN, LOVE, NTIC
- Friday:JPM, BLK, WFC, MS, FAST, BK
Fed Watch:
Stocks to Watch
Volatility – A moonshot of volatility hit last week during the first few days of April. A bit too much? Perhaps, but trying to wade back in is difficult at best, impossible at worst. If the VIX comes down sharply there could be a relief rally.
Tariffs – News of tariffs last week crippled markets here in the US and worldwide. The ramifications are still unknown but most economists believe this is a huge negative for growth. Will there be de-escalation or continued pressure on countries.
Earnings – We’ll have some earnings reports this week, mostly the banks get things underway. With the sharp moves down in this group lately it will take some very soothing words to get investors back in the game.
