The Fuse
Equity futures are pulling back on this first day of trading in December, but there is plenty of time to reverse this minor loss. As we have seen over the past several weeks the dip buyers are active, continuing to add stocks at every opportunity./span>
Interest Rates are popping up this morning as bond traders do a bit of selling. No question the recent rally in bonds has been helpful for stocks, but who can blame anyone for taking some profits after a nice run. With the drop last week of the 10 yr below 4.2% that sets up an interesting scenario into this week’s job report and next week’s fed meeting. Still a 2-1 chance of a rate cut next week.
While US futures are down this am stocks in Europe were also weak, falling about .2% on moderate trade. The dollar rose sharply, up .5% overnight, gold is down as is silver but a sharp 1.2% rise in crude this morning has our attention. The German 10 yr bund yield declined 3 bps, the 10 yr US treasury yield jumped 4bps. Stock in Asia were higher, Japan up by .8%, Hong Kong up.7% and Shanghai up a solid 1.1%.
Earnings are going to be interesting this week with names like Salesforce, Chewy, Ulta, Box, Zscaler, Veeva an a slew of retail names.
What an amazing month for stocks as the small caps finally woke up and rattled some cages. The performance in November was stunning, the IWM up more than 10% on the month and putting the small caps back in the conversation of best performing index. It still trails the SPX 500 and Nasdaq but historically we have see small caps finishing the year very strong, so who knows? There has been a sea change this month, very noticeable with the small caps, and given the recent strength in bonds why not see a bit more outperformance?
Better than 2-1 breadth on the last trading day of November, a fantastic month for breadth as indicators in this area are on buy signals. Oscillators are still positive too, ending the month well above 100. Further, new highs are continuing to crush new lows, this indicator is supporting higher prices.
Volume was lower than normal Friday but that should be expected with the half trading day. One thing to note is volume trends were strong and positive during the first couple of hours of trading, so that could flow into this week.
New highs again for the indices, that makes it difficult to locate good support levels but as we know the 10 and 20 moving averages are often areas where markets ‘check back’ to find buyers and sellers. For the SPX 500 that would be 5,930, the Nasdaq just recently tested the 20 ma and may now be ready for liftoff towards alltime highs tagged in early November.
The Internals
What’s it mean?
As we should have expected the internals were not going to give us much information on this shortened trading day. However, the VOLD did finish higher as did the ADD, something we have not seen too much. Notice the plunge in put/call and VIX, buyers were coming after stocks Friday – maybe a late month ‘window dressing’, we’ll find out this week.
The Dynamite
Economic Data:
- Monday:SPX final manufacturing PMI, ISM manufacturing, construction spending
- Tuesday:JOLTS, auto sales
- Wednesday:ADP, Fedspeak, ISM services, factory orders, fed beige book
- Thursday:Jobless claims, US trade deficit
- Friday:NFP report, consumer sentiment, consumer credit, Fedspeak
Earnings this week:
- Monday:ZS
- Tuesday:BMS. CM,. DCO. CRM, OKTA, MRVL, BOX, BASE
- Wednesday:CHWY, FL, DLTR, THOR, CPB, CBRL, HRL, DAKT, AEO, FIVE, SNPS, NCNO, VRNT
- Thursday:DG, TD, CSIQ, SIG, BMO, CAL, KR, CM, LULU, PATH, ULTA, DOCU, GTLB, HPE, IOT, VEEV, ASAN, WOOF
- Friday:GCO
Fed Watch:
Not much fanfare as only a couple of fed speakers this week, Goolsbee and Musalem. Most of the chatter recently has been worry about sticky inflation, the data has been telling us this as well. The next Fed meeting is Dec 10, the last of the year, the market is looking for a cut but may be disappointed.
Stocks to Watch
Sentiment – No question momentum is on the side of the bulls. This is the first week of trading in the most bullish month of the year, and coming off a spectacular November the best bet is on a continuation rally. This week is important to see if that momentum continues or if the market is looking to take a rest.
Retail Stocks – Coming of a very strong first holiday weekend, we may see a pop in some retail names as these companies ready for a big finish towards Christmas. Pay attention to deals and discounting.
Energy – Oil has been going sideways a bit but with a OPEC meeting coming up soon that may change, if the cartel decides to slice production.
