The Fuse
Stocks are trying to push through a consecutive up day for the first time in August. Overall, market interest has been sour, huge drawdowns in equities have been seen this month, and if that continues into September with higher bond yields then stocks could be under pressure again.
Interest Rates are steady this morning but the short end of the curve (2 year) is climbing a bit. Good to see rates settling down after a volatile couple of weeks.
Big news out of China as the government decided to relax some stock holding policies, including cutting taxes and making it more ‘friendly’ to own stocks. This was clearly an effort to try and boost interest in the stock market as the economy is sputtering.
Still seeing some earnings fallout from last week’s NVDA release. Some interesting earnings later in the week from CRM, CHWY, LULU, HPE, DELL and CRWD among others.
Thursday is a big day for most technicians, it is the end of the month. August has been rather poor but with four days remaining there is a chance to see a bit of upside before the books are closed on the 31st. This could be the month that calls out a new bull market, we’ll have to see monthly MACD to be certain.
Breadth was better but very weak again, the McClellan oscillator remains bearish and the summation index is still pointed downward. There is not much positive the markets can do if breadth remains negative, 17 of 20 day so far this month.
Weaker volume especially as the market rallied late in the session Friday. Blame it on the volatility sellers, who were carefully looking for their spots. Rallies on weaker turnover eventually spell trouble, there simply is no conviction in the buying.
The SPX 500 closing above 4,400 Friday was a shallow victory for the bulls. All week long buyers were being punished and levels were hit hard.
We nearly saw a test of 4,330 – a place we said would need to hold firm if the advance were to continue. The Nasdqq did manage a close above 15K, we’ll have to see if there is some followthrough this week. As it is, the markets are simply drifting here.
The Internals
What’s it mean?
A win for the bulls but it was a shallow victory. The VOLD up but not definitively, the ADD also up but not spirited. The VIX did decline again, pushing the indices higher late in the day, put/calls remain elevated and that is keeping a lid on the market. Ticks improved from the rout of Thursday.
The Dynamite
Economic Data:
- Monday: N/A
- Tuesday: Consumer Confidence, JOLTS
- Wednesday: ADP employment report, GDP Q2 Second Estimate, Pending Home Sales
- Thursday: Challenger job cuts, jobless claims, PCE price index/income spending
- Friday: August job report, ISM manufacturing, S&P Global PMI for August
Earnings this week:
- Monday: N/A
- Tuesday: BBY, BIG, SJM, AMBA, BOX, HPQ, PVH
- Wednesday: CHWY, CRWD, FIVE, OKTA, CRM, VSCO
- Thursday: CPB, CIEN, DG, HLR, OLLI, AVGO, DELL, LULU, S, VMW
- Friday:
Fed Watch:
Well, if anyone was expecting something different from Chair Powell following last month’s Fed hike they were disappointed. The Chairman was quite hawkish again and said under no uncertain terms the committee is ready to hike rates further. The Cleveland Fed Nowcasting sees August CPI rising by 9.6% annualized on the headline number, but core about unchanged (higher than preferred). If that number comes in hot we’ll see talk of 6% rates coming very soon (fed funds). As of now, any rate cuts probabilities are dwindling.
Stocks/issues to Watch This Week
Salesforce – This company reports earnings this week and many are concerned about the valuation, which has become quite rich in a tough market.
VIX – We’ll be watching volatility again as we approach the month end, which could ignite some fireworks. A three day weekend is upon us though and that could lead to a drop in volatility.
SPX 500 – Thursday is the day, the last trading session in August. If the MACD manages to hold the crossover from July then we can designate a bull market has been established. It’s been awhile! Doesn’t mean the market goes up every single day, however.
