The Fuse
Equity futures are mixed this morning as the SPX 500 tries to move in on an all-time high. Yesterday was an all-time high close for the index but the all-time high of 6,920 was tagged on October 29th. As of last night, about 20 points away. Industrials and small caps already in new price territory. Finishing the week on an upbeat note would be a huge positive.
Interest Rates are rising this morning as traders are selling off bonds, seeing some risk of excess supply coming online. No question the government would like to sell more bonds at higher prices (lower yield) to refinance the debt. The 10 yr yield is starting rise up again, and if it comes back to 4.3% it could unleash some bond selling. Fed funds are steady, high yield remains well bid.
Stocks are looking down this am but Europe rallied .4% in the STOXX led by France and Germany, FTSE up the same amount. Gold is up strong, better than 1% but silver is slightly lower. Crude oil unchanged, the dollar index also flat. In Japan the Nikkei up a robust 1.4%, Hong Kong up 1.7% and a .4% gain in Shanghai. Yields are rising, German bunds up 1bp, 10 yr yields also up 1bp.
Earnings from Lululemon were strong and guidance up, they are now looking for a new CEO. stock is up 10% on this news. Broadcom with strong numbers and guidance but the stock is falling this morning as maybe one metric may be disappointing. Costco hit good numbers but this stock is mired in a downtrend, so it needs some time to shake things off, RH with strong numbers but again another name in a nasty downtrend.
It appeared stocks were heading south on this first day following an important fed decision. But the bulls had something else in mind, and per usual there was a fakeout sell signal with futures getting smashed overnight, then an opening selloff that tempted the bears to press down hard, but they were limp and could not pull the trigger, hence the buying was ferocious as we came to the close. We may be starting to see blue skies and new highs very soon on SPX 500, the Industrials and Russell 2K are already there.
Gobs of breadth are very bullish, so says Tom McClellan (of oscillator fame). That means the bulls have control of the tape and the action, while there had been a pause before this week’s fed meeting, make no mistake – they are in charge. New highs crushing new lows as we reach the midpoint of the month. Oscillators are moving in the upwards direction again, volume oscillator is also bullish.
Very good turnover yesterday as the bulls put in a followthrough day. That is important to keep this trend alive for a bit longer. The Industrials had an accumulation day on a new all time high, that is a rarity. Nasdaq was down for much of the day thanks to Oracle, but the small caps ripped higher, but not an accumulation day, though.
We could say some short term moving averages like the 5 or 8 day were tested yesterday, but the big test came overnight in the futures market. A better than 1% down session was fought off hard by the bulls as they wrested control of the day. It was important to see the indices bounced from support./span>
The Dynamite
Earnings this week:
- Friday:JCI
Economic Data:
- Friday:wholesale inventories, Fed speak
Fed Watch:
The big meeting all have been waiting for is finally here, the last Fed conference of the year. Fed futures are expecting a rate cut on Wednesday and in all likelihood that will happen, but it’s the statement and the press conference that will be even more important. Further, economic projections will be out, the latest views of where policy, gdp, inflation and unemployment will be down the road.
Stocks to Watch
Volatility – The VIX shows high complacency right now, the market is ripe for a rip lower. Volume trends are good, dip buyers may be active again on the next move down.
Oracle – Earnings this week from this mega tech name, many have been watching this one closely after a monster move up in September. The stock has now lost most of that move and momentum seems to be building to the downside.
Retail – Strong retail numbers from a few companies lately has the bulls optimistic about this group. However, few and far between, we’ll hear from lululemon and a few other retail-related names this week to see how the consumer is doing.
