The Fuse
Equity futures are mixed this morning with the Industrials higher but the SPX 500 and Nasdaq mostly flat. It’s been a volatile week but very little net change, the futures are about 1.7% away from an all-time high (6,944). Seasonal trends may help push the markets up but expect some volatility in between.
Interest Rates are inching up this morning but fixed income players seem to be satisfied where bonds are priced. The 10 yr still hovers around 4%, high yield spreads are tight and fed funds futures are reflecting now an 89% probability of a cut next week, but only a 26% chance of a cut in January.
Stocks in Europe higher once again, the STOXX up by .3% led higher by Germany and France. Stocks in Asia were mixed, Japan up a robust 2.3%, Hong Kong by .7% but Shanghai down .1%>. gold is about flat, silver off 1% as crude moves closer th $60. The dollar index flat. Yields were up in Germany and the US, higher by 1 and 2 bps respectively.
Earnings from Five Below were outstanding and with strong guidance, Snowflake also beat and raised but they are selling off a bit this morning, just back to Monday’s levels. Salesforce beat but not by enough, the stock is barely up this morning. We’ll hear from Kroger, Dollar General this am and tonight we have Ulta, Docusign, Rubrik, and HP Enterprise.
Another up session for the indices as they continue to chip away at Monday’s losses. The action overall has been constructive, we are seeing a broadening out of the market when it rallies and that is positive. Financials participated yesterday with strength in JPM, C and BAC. There is no disputing the market rally will be enhanced by strength in this group. Small caps continue to perform well and are again near an all-time high.
Another day of strong breadth signals the bulls are serious about this market rally. A Zweig Breadth Thrust signal may be reached with two more strong days of breadth. Oscillators are firmly above the 100 level and are approaching overbought, new highs are hammering new lows again, this indicator on a buy signal.
A nice push of volume for the Industrials yesterday giving that index another accumulation day. However, the others did not clock in with enough volume. That’s fine, the price action was good after a swift fall from some Microsoft news. The indices fell .5% on that ‘news’ but the dip buyers quickly stepped in and bought with vigor. The strong volume hit after that brief selloff.
The further the indices extend away from the moving average support the more difficult it becomes when a corrective move happens. Basically, a check back is required but not announced, and that will startle some traders/investors. Remember recently a pullback to the 100 day moving average felt like death, but the dip buyers stepped in quickly and brought the markets back up (at a time when a correction was not supposed to happen!).
The Internals
What’s it mean?
How about that bullish showing on the internals! Huge gains for the VOLD yesterday and even the ADD finished near its highs. This was a very good day for the markets and supported by strong internal moves. VIX down most of the session, put/calls heading lower and ticks were super green, buy programs hitting all session long. Can we get a followthrough day?
The Dynamite
Economic Data:
- Thursday:Jobless claims, trade deficit, Bowman speaks
- Friday:PCE, income/spending, consumer sentiment, consumer credit
Earnings this week:
- Thursday:KR, DG, HML, BBW, SAIC, TD, DCI, HOV, RBRK, DOCU, S, ULTA, HPE,
- Friday:VSCO, KNOT
Fed Watch:
Plenty of talk from the Fed recently and most of it has been dovish. Since NY Fed Chief Williams said he would be voting for a cut at the next meeting, the futures market has done an about face. We’ll hear from Chair Powell this week along with Miki Bowman, who is in the rate cut camp.
Stocks to Watch
Small Caps – What a resurgence of the ‘littles’ in the market. Their leadership is certainly important to keep the market trending higher.
Retail – Several retail names will report this week but more importantly is hearing how the consumer is doing the first weekend of holiday shopping. It seems records may be broken this year.
Rates – We always keep a close eye on rates but during this start of a new month if they head lower then we are likely to see continuation of the stock rally.
