The Fuse
Equity futures are trying to bounce back this morning after a pretty sharp down move Monday. There was really no bid in the market yesterday evidenced by the movement in the internals (see below). If Turnaround Tuesday happens we’ll see some good action all session long, but yields need to cooperate.
Interest Rates continue to rise as the bond selloff continues. Perhaps the fixed income market is seeing inflation remaining sticky with the Fed unlikely to support several rate cuts down the road. Next week’s meeting might be contentious if the CPI and PPI number reflect hotter than expected inflation.
Stocks around the globe were mostly lower, Europe down about .2% but the dollar managed to climb .1%. Crude oil lost its gains from Monday, down close to 1% while gold is mounting another run towards 2,700 per ounce. German 10 yr bunds and the US treasury 10 yr yield were both up .1%, in Asia stocks were mixed with the Nikkei in Japan up .5%, Hong Kong down .5% but Shanghai up by .6%.
Horrendous earnings and guidance from Oracle, a bit of a surprise as some competitors notched big wins this last quarter. It wasn’t so much this quarter’s earnings but the guidance was awful, the stock is now back to where it was in early November. MongoDB was good but they showed some concern over one seasonal product, that pushed the stock lower after being up better than 10% on strong guidance. Today we’ll hear from AutoZone, Ollies, Academy Sports then tonight GameStop, StitchFix, Dave and Buster’s.
Stocks finally succumbed to the recent pressure on the breadth. Stocks were a sale from the get go and really never recovered any positive ground all session long. With higher rates, higher volatility and higher gold it was a great mixture for a risk-off day, and while some stocks did push higher the trend was down. Is this something to worry about? Not just yet, but certainly the overall action this month has not been impressive. We’ll see if turnaround Tuesday offers us anything different.
Weak breadth today with very weak internals (see below) may prove to be troublesome. All month we have had poor breadth figures, this indicator now on a sell signal. Oscillators are back to bearish too, but new highs are still winning over new lows, that intermediate term indicator is still bullish until further notice.
Good not great volume is the only saving grace for this down session. Could this be the start of something bigger? Certainly, but we’ll have to see how things play out, as it is the QQQ may be putting in a top here that requires some corrective action. If volume starts to pick up we could see problems develop, but for now we’ll sit back and see how things go.
Are we finally going to test some lower levels of support? It just might happen, but more downside needs to be considered. As it stands, moving averages like the 20 day are far enough away to cause some pretty heavy damage if the sellers take control. That is a possibility but we would look to that moving average as a place where dip buyers would come in strong.
The Internals
What’s it mean?
Tough day for the bulls as the internals once again take the brunt of the punishment. Notice the weakness in ADD and VOLD, the latter was doing pretty well holding up until some last minute sell programs hit the markets hard. Those are evident by the extreme red ticks the last couple of hours, just strong selling by some big institutions.
VIX also climbed the ladder today, it was very well oversold on Friday, we’ll see if that matters later in the week with inflation readings.
The Dynamite
Economic Data:
- Tuesday:NFIB optimism index, US productivity
- Wednesday:CPI, federal budget
- Thursday:PPI, jobless claims
- Friday:Import Prices
Earnings this week:
- Tuesday:AZO, OLLI, ASO, FERG, JOUT, GIII, GME, SFIX, PLAY, SKIL, SPWH
- Wednesday:M, VRA, ADBE, NDSN
- Thursday:CIEN, LQDT, AVGO, COST, RH
- Friday:N/A
Fed Watch:
Fed speakers are quiet this week as they prepare for next week’s meeting. This past week a Dealbook interview with Chair Powell revealed his hesitancy for being aggressive in cutting rates. The committee likely shares this sentiment too, but more data this week will help determine the path forward.
Stocks to Watch
Amazon – This stock was strong last week after their AWS event. We’ll see if they continue to make new highs, the shopping season is here at it usually means Amazon is on top of its game.
Inflation – With the November CPI/PPI this week, it’ll be important to analyze the numbers to see if inflation remains sticky or is actually falling.
The committee is more likely to favor a pause even if they do cut rates in a week.
Bitcoin – The crypto hit a milestone last week, tagging 100K for the first time. The momentum and liquidity is ver strong with Bitcoin and could lead to much higher prices in the short term, perhaps up to 125K.
