The Fuse
Equity futures are modestly lower as the market try to regain some footing after Tuesday’s horrendous showing. Save for the Dow Industrials, the indices are now below their 50 day moving average, a key marker of strength/weakness. More time spent below this moving average simply means the trend has shifted downward and selling pressure may exert itself. Today the September vix future becomes the front month, there is a hefty premium between vix cash and the future which could help buoy stocks.
Interest Rates are falling a bit on the long end after yesterday’s session saw the 10 year yield close well above 4.2%. That narrows the inversion with the 2 year (tighter spread now) but signals economic growth is very strong and the Fed is likely to forge ahead with more rate cuts.
With weakness in US banks Tuesday we saw European stocks faltering overnight. Yesterday, Fed official Neel Kashkari called for higher rates, China continues to stumble with economic weakness following a cut in their borrowing rate Tuesday. Also in China, Tesla announced they are cutting prices of cars even more.
Strong earnings but a revenue miss from Target today but the stock is up strong on better than feared guidance. Last night Cava delivered solid earnings and guidance. Also today TJX gave a strong earnings outlook, later today we’ll hear from Cisco, Synopsis and tomorrow am Walmart and Tapestry.
Stocks took it on the chin Tuesday as the prior days gains were wipe out entirely. Strong retail sales yesterday was a positive but also pushed interest rates higher as well, above 4.2% on the 10 year bond.
Breadth was poor once again, the second day in a row but even worse. This indicator is solidly on a sell signal but the oscillators are deeply oversold, a sharp rally can happen at any moment.
Volume was elevated all session long as sellers swamped buyers. Breadth was down 24-5 and most of that was concentrated in selling volume.
This indicator is also on a sell signal.
Each swipe at 4,500 and failure is a bad sign for the bulls. There are just no buyers up there, even if the rest of the market is oversold.
After a strong start in the first half of the year the bulls are sputtering. If that continues on, the character of the market will change to a more bearish scene.
The Internals
What’s it mean?
The VOLD continued downward with some very heavy volume to the downside. All day long that persisted, no bid in the market whatsoever. Ticks were concentrated in negative territory most of the session, and once again put/calls are on the rise as is the VIX, which close above 16% for the third time this month. Dip buyers were nowhere to be found.
The Dynamite
Economic Data:
- Wednesday: Housing Starts, Industrial Production/Capacity Utilization
- Thursday: Jobless Claims, Philly Fed Index, Leading Indicators
- Friday: Eurozone CPI, Japan CPI
Earnings this week:
- Wednesday: EAT, TGT, TJX, WOLF, CSCO
- Thursday: LITE, TPR, WMT, AMAT, FTCH, ROST
- Friday: BKE, DE, EL
Fed Watch:
Fed speakers last week cautioned about the committee being too complacent about sticky inflation. Yet, the inflation data actually presented some positives that the Fed can work with. We’ll be listening carefully to any comments by committee members and the FOMC meeting minutes released on Wednesday.
Stocks/Issues to Watch This Week
Options – A big options expiration this week with a slew of equity options expiring Friday, always volatile.
Retail – Huge week for retail stocks as the ‘big names’ will deliver their earnings releases, along with retail sales Tuesday morning.
Nasdaq – This index has now fallen below the 50 day ma for the first time since early March, when the Nasdaq went on a monster run higher. Let’s see if the Nasdaq repeats the pattern.
