The Fuse
Equity futures are again higher this morning as the pre-market bullish dance continues. Just about everyday the futures were higher before the open but on at least two occasions failed to finish in the higher end of the trading zone. Will today be the day? Last trading day of the week.
Interest Rates are mostly flat this morning as fixed income buyers are not finding bargains. With the big drop in yield last week it seems some are waiting for bonds to sell off in order to get back into the game. 2 year yields remain steady while junk bond yields continue to flash bullishness, a strong economy. Fed futures still pricing in a 90% chance of a cut at the September meeting.
Stocks continue to climb overseas, the STOXX in Europe up modestly, .2% with the FTSE also up the same. The dollar index rose .1%, gold hit a record high this morning up nearly .8%, silver is reaching higher as is crude oil. German 10 yr bund yields rose 2bps while 10 yr US treasury yields were flat. In Asia Japan had a strong showing, up 1.9% but Hong Kong was down hard, off 1% while Shanghai was down .1%.
Earnings last night from Expedia were spectacular, beat on all levels and raised guidance. Mixed results from Twilio and Pinterest but we’ll see how that goes today. Just horrendous numbers from The Trade Desk again, Kratos was solid as was Soundhound. Chyme had its first earnings report, mostly better than expected.
It appeared at the start of trading the markets would rip higher, but that is why we play the game for 6 1/2 hours and not 2! Stocks fell flat on their faces as buyers refused to participate, and that was a shame because a followthrough day would have been very bullish. A poor bond auction was cited as the reason for selling off but any reason is good enough.
Breadth was good early in the day but failed miserably towards the end. Stocks cannot move up strong if the breadth is weak, and that means we need more strong turnover and buyers stepping up to the plate. Oscillators remain negative as the bearishness persists. If the bulls can string together a few good sessions in a row then they might have something, but until then this back/forth stuff is going to be annoying.
Can the volume get turned up please? It has been a sleepy time for traders this month, and I’m afraid it might get even worse. We like to see good, strong volume when the markets are rising – it indicates interest from large institutional buyers. We may have to wait a few weeks though and live through some erratic trading sessions.
The markets continue to consolidate and digest gains, even intraday. Sadly, the small caps ruined the moment for the bulls, the IWM falling all session but finished a bit off its lows. Today being Friday and likely a flip from yesterday, we want to see how the indices finish and whether or not volatility gets sold off. Next week has inflation reports and then Jackson Hole in two weeks so I suspect a lighter commitment by traders is likely.
The Internals
What’s it mean?
More garbage from the internals yesterday. The VOLD and ADD were unimpressive at best, the VIX did decline late so the bulls have that to work with, but ticks were mostly on the red side of the ledger. TRIN fell below 1 and the put/calls remain steady. Not a great day but let’s see what Friday is all about.
The Dynamite
Economic Data:
- Friday:n/a
Earnings this week:
- Friday:FUBO, TEM, WULF, FET, WEN, PAR, PMFS, SLVM
Fed Watch:
So, as expected the committee last week decided to leave rates unchanged. There was a difference however, with two Governors dissenting (first time since 1993). They both wanted to cut rates this time around, but the market was not expecting the move. If it happened that might have signaled the Fed sees something we don’t see – weakness. That might have been covered in the labor report which showed many revisions downward. That makes September the likely place for the next rate cut, now 90% probability.
Stocks to Watch
Disney – The company is all about the consumer and when they report this week we’ll have a good snapshot of how the spending is going. The transition Bob Iger talked about last year is nearly complete, we’ll see if they have some new things to uncover.
Volatility – The VIX really moved on Friday, pushing higher as the market shed some pounds. Finishing above 20% is not bullish but with less news to impact stocks that could fall sharply in the coming days and with it comes a market rally.
Gold and Bonds – The yellow metal had a banner day Friday but so did bonds, yields on the long end of the curve fell sharply as it is now assumed the economy may be shifting gears downward. Gold is less than 3% off all time highs as the weakness in the dollar continues. Bonds have been on the move lately, we’ll be watching this trend as it unfolds.
