The Fuse
Equity futures are down moderately this morning, following through from yesterday’s drubbing. It seems that wit a rise in yield the counter move remains to sell stocks. After a very positive month of July, no surprise seeing investors/traders take money off the table, it’s a prudent move especially when this month in particular historically brings a slew of volatility.
Interest Rates are higher again today following yesterday’s sharp move up in yield.
Stocks were dragged lower as word of a debt downgrade soured the mood on Wall Street.
Poor outlook from Paypal and Qualcomm yesterday, while we had solid numbers from HOOD, then today strong earnings from Regeneron and Wayfair. The big numbers are later today with Apple and Amazon.
Jobs are what it’s all about the rest of the week. A strong ADP number is pointing towards a solid NFP number on Friday, but of course last month’s numbers were much higher than expected. Volatility rose up sharply yesterday as sellers were in control. The Uptrend is under pressure now according to the IBD.
Breadth again was horrendous and now this indicator is on a sell signal. New lows on the Nasdaq exceeded new highs for the firs time since the start of July, and a few more days like this will show a deeper correction is likely.
Volume was elevated yesterday so count Wednesday as a distribution day. A series of this will put the uptrend into a correction, and that could happen within days. The 50 moving average comes in at 4394, more than 2% lower than current levels. News from Apple, Amazon and the jobs report could make this level come easily.
As we see resistance at 4,600 fade into the sunset, we should now be mindful of support levels, which come in a bit lower than yesterday’s close. On the SPX 500 we see 4500 and then 4439 (gap fill) followed by 4,400 and even more support at 4,330 which would be the last stand for the bulls.
The Internals
What’s it mean?
We could call it a followthrough day to the downside, setting up for a more substantial correction to come.
However, we are nearing an oversold condition already, the VOLD down hard for a second day in a row while TICKS show heavy negative concentration. VIX shot higher by more than 16% on Wednesday while put/calls moved up, they are close to rolling over to sell signals.
The Dynamite
Economic Data:
- Thursday: Productivity and unit labor costs, global services PMI, ISM non-manufacturing, Factory orders
- Friday: non-farm payroll report
Earnings this week:
- Thursday: BUD, GOOS, CMI, PZZA, SHAK, VMC, AMZN, AAPL, SQ, NET, POST, DBX, FTNT, WW
- Friday:AMC, CBOE, PRLB
Fed Watch:
Last week’s Fed meeting seemed ho-hum to many but to use there was a message sent, and that was the committee was trying to pivot slowly, out loud. Of course, nobody heard it that way to feel confident about that call, but we believe the Fed may consider a pause or a hike over the next few meetings. Any hike that does come is likely to be the last one. We’ll have some speakers out this week talking about the economy. While inflation remains too high for their liking, they are still very pleased to see prices starting to come down due to their efforts.
Stocks to Watch
Apple – the largest company in the world will report earnings this week, the stock has added more than 1 trillion dollars in value this year. We don’t expect a disappointment but rather news about upcoming products and production concerns.
Jobs – Friday’s big employment report will give us a glimpse of how the economy has started off in the second half of 2023. So far so good and if productivity is strong the day before, the Fed will be very pleased with their hawkish campaign.
Interest Rates – Last week saw rates climb above 4% on the 10 year for a brief moment, enough to scare stock investors. We’ll be watching for more ‘scaring’ this week, if it materializes.