The Fuse
What are futures doing?
It is the last trading day of August and the bulls are stumbling to the finish line. Without too many catalysts to push markets higher the macro news is driving the action. ES futures are down about 12 handles but well of their overnight lows, both Nasdaq and the Industrials are lower as well.
News
Minor losses in Japan overnight, same for Hong Kong but Shanghai picked up .9%. The STOXX in Europe down modestly led lower by Germany. FTSE rose up .3%. Gold is sliding a bit, silver up and crude oil gaining 3% on renewed tensions in the Strait of Hormuz. Bunds rose up again, hitting 3.29%, 10 yr US treasury yields fell by 1bp.
Volatility
VIX closed last week at lows for the year so it is bouncing back a bit today, about 5% or so. That seems like a lot but considering how low the fear index is currently it is just getting back what was recently lost. It remains far too low and cries out for a corrective period.
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Interest Rates
Yields are slightly higher this morning but not moving too much, mostly on the long end. On Friday fed funds futures jumped higher (yield) as did many of the shorter maturities on the yield curve. The 10 yr remains above 4.7% and that could be problematic. 2/10 spread has come down sharply, Friday saw a big rise in the 2 yr up to 4.33%, highest since July and nearly a breakout. High yield spreads widened on Friday but remain in demand.
Earnings
We have some big earnings upcoming this week including Palo Alto, Broadcom, Credo, Snowflake, Dell and MongoDB. All could move markets significantly.
Events
Stocks ran out of steam Friday as the hype from Kevin Warsh’s speech wore off. Internals once again were weak, at some point these are going to matter but not for the time being. Earnings are strong and continue to buoy the markets, each time it appears there could be a major drop the dip buyers and value players step in for a buying chance. September is here and that brings a slew of new problems to the fore. Could see some window dressing before month end today.
Breadth
Breadth was not good at all each day this week, though positive on a couple of sessions. Weak breadth means a lack of participation and that eventually will be felt when the market retreats. Oscillators still bearish, new highs barely beat out new lows. Just not much interest in buying markets at the moment.
Volume
Turnover was putrid this past week and may also repeat the low levels this coming week. Remember, volume is like a polygraph, it does not lie. But, when there is a lack of conviction and volume prints are low we also have a lack of clarity. When is the money showing up, either in or out? Inquiring minds want to know.
Support Levels
Let’s call it a wide range here, stocks just cannot breakout nor can they break down. That could go on for quite awhile, moving averages are starting to flatten out, eventually a coiled spring will be created and a sharp move up or down will follow. Resistance at old highs 7800 with good support at 7620 on the SPX 500.
The Internals
Another weak showing by the internals, the VOLD leading the way down with a very poor session. ADD and ADSPD put in their highs of the day on the opening print and fell from there, the VIX remains dangerously low here while the TICKS reflected heavy selling all day long. Nothing good to support the bulls here last week.
The Dynamite
Economic Data:
- Monday:N/A
- PMI, ISM, construction spending, JOLTS
- Wednesday:ADP, factory orders, fed beige book
- Thursday:Jobless claims, trade balance, PMI and ISM, Fed speak
- August NFP, wages, hourly earnings
Earnings this week:
- Monday:SAIC, BLRX, CARG
- Tuesday:NIO, RZLV, MDT, HMR, CRDO, DELL, PANW, MDB, GTLB
- Wednesday:FCEL, CXM, GIII, OLLI, DAKT, AVGO, HPE, SNOW, NTAP, FIVE, CHPT, PVH, GOLD
- Thursday:CIEN, WLY, VSXY, LE, GCO, DLTH, BRC, CPB, TTC, PATH, AMBA, DOCU, ZS, LULU, IOT, ASAN, PL
- Friday:KNOP
Fed Watch:
Well, the Jackson Hole Conference came and went with little damage to the markets. We did not expect Kevin Warsh to say too much given the committee has a meeting coming up in a few weeks. They remain data dependent and will be looking for reasons not to raise rates down the road.
Stocks to Watch
Software names – Strong earnings from Salesforce has re-kindled animal spirits into this group. Will it be short-lived or carry further into the end of the quarter?.
Jobs – The August report comes out Friday just before a long weekend. Last month saw weakness in labor, this month is important to see if a trend is established.
Volatility – The VIX is now nestled into its low of the year, under 15%. That is a dangerous level and smacks of complacency. This is not the time to be all-in the markets financially or psychologically.
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