The Fuse
What are futures doing?
A quiet market this morning, a mixed picture as the indices try to push through some resistance before the end of August. Two more trading days left. ES futures are flattish, Nasdaq off but the Industrials are higher by a fraction.
News
Positive activity in Asia as Japan rose up .8%, Hong Kong added .3% but Shanghai was flat. In Europe the STOXX was lower, off .7% led down by losses in France, but Germany was higher. The FTSE was also down about .8%, gold is down modestly but silver up better than 1%. crude oil off 1/2 percent. Yields are up slightly, bunds hit their highest level since May 2011 to 3.27%, 1o yr treasuries up 1bp.
Volatility
VIX came down sharply and is now in the 14% range, still dangerously low but indicating there is very little fear in this market. The most fear we can see is FOMO, and investors/traders see the big gains like on Thursday and don’t want to be left behind.
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Interest Rates
Slight bump higher in the yield curve but nothing special, the long end of the curve is firming up and pushing back towards 4.7%. High yield plays remain attractive, fed funds futures not moving much bt still portray a small chance of a hike at next month’s meeting. Nothing predictive here yet, but we may see movement after fed Chair Warsh’s statement today.
Earnings
Poor earnings from Autodesk last night, strong results from Affirm and Marvell but the latter is being sold off on profit taking. Ulta beat as well and offered a big buyback plan, Workday with a mixed quarter but Elastic very strong numbers.
Events
Strong gains finally for the markets as they finally managed to run the bulls, thanks to strong performances by Salesforce and NVIDIA. These two names led the pack but others also participated, including Microsoft and Apple. The indices remain rangebound until further notice but are closer to all-time highs, and could make it there with some help by the end of the month. Volatility remains dangerously low, it won’t take much to tip this market over.
Breadth
Just the same old story, weak breadth that really masks the problems this market is seeing at this moment. Sure, earnings have been good and are anchoring the market, they act as a put underneath the indices. However, as we move into a challenging period of time for markets there is going to be payback, and we understand that under the hood the markets are not ready to accelerate, barring any specific macro news.
Volume
Even lower turnover than the prior day, in fact one of the lowest non ‘pre holiday’ sessions of the year. What will it take to get the volume levels back up? Certainly some volatility in the market, shake the trees a bit and start to scare people. As of now, the fear/greed index is on the high side of neutral, no edge whatsoever..
Support Levels
Solid move for the indices yesterday but as usual some followthrough is needed. Can the bulls keep the momentum going even when the is very little two-way action? The SPX 500 is only 1% away from all-time highs, macro news is quiet, almost too quiet.
The Internals
On a day when the market players should have been celebrating across the board the strong earnings from big tech names, the internals just floundered. That is a disappointment, but par for the course. VOLD was barely positive yesterday and finished much lower, the ADD weak again, put/calls though were down as was the VIX, hitting the 14% area. Ticks were evenly distributed, that’s a surprise especially on the Nasdaq. Just nothing too positive here.
The Dynamite
Economic Data:
- Friday:chicago biz barometer, Michigan final survey, Jackson Hole Conference begins
Earnings this week:
- Friday:CHA, MNSO
Fed Watch:
All eyes and ears on the Fed Chair this week as the annual Jackson Hole Conference takes place. This is the scene where in the past there have been policy shifts ‘hinted’ at, but of course anything drastic will have to wait until the September meeting. I do not expect much to change in the language or the message from Warsh, other than talking down inflation and how it needs to be the committee’s goal to get to 2%.
Stocks to Watch
NVIDIA – The giant chip company is in the spotlight as they will deliver earnings on Wednesday. Can they continue to beat and surprise to the upside? Many believe so but the price action has been subdued.
Metals – We talked about gold last week and now it is in the area of new highs. Silver is also on the move and should be making some breakout moves soon.
Oil – Black gold had a good week and looks to make a run at higher prices, the problem is the Iran War continues to linger. That could be problematic as we head into a big driving weekend (holiday).
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