The Fuse
Equity futures are shooting higher this morning following a long three day weekend. Traders are ready to go today as we begin the last half of trading in the month of February. So far so good this month as indices are up and near all-time highs.
Interest Rates are rising up a bit this morning as investors/traders continue to weigh in on the hot inflation numbers from last week. It is highly likely there will be no rate cuts in 2025 if price levels start rising.
Stocks are pushing higher this am after some nice gains overseas. Not much help from Europe as the STOXX was higher by only .1%, France was flat while Germany up slightly. Gold is ripping higher as is silver, crude oil up .5%. The US dollar rose up .1%. German 10 yr bund yields were up 2bps, US treasuries up 4bps, stocks in Asia were mixed with Japan up by .2%, Hong Kong with a nice rally up 1.6% but Shanghai down .9%.
Earnings have been pretty decent of late, last week strong numbers from Applovin, Roku, Cisco and several others helped push Nasdaq higher. This coming week we have names like Walmart, Etsy, Alibaba, Arista, Baidu, Wix, Block and Booking.com. A solid week from this group makes a run to new highs that much easier to the indices.
Retail sales for January came in weak and inflation numbers this past week were hot, so that mixture would have probably led to a massive markdown in the markets. That happened on Wednesday but the market volatility was not buying it, in fact VIX barely budged as the sellers were jump out the window after the CPI was released.
In bull market trends we see this sort of panic and climbing the wall of worry. Should be good news for the markets and perhaps a strong finish in February.
Breadth was positive but fairly weak most of the day as it appears traders left early for the long weekend. Retail sales for January were released and were awful but the markets took it in stride. Oscillators remain above zero and new highs are still advancing (barely) over new lows. This indicator is clinging to a buy signal.
Volume trends were slow on Friday, perhaps waiting for the crush of volume that will hit at next week’s option expiration. We saw good turnover Thursday which spawned another accumulation day, they have started to show up recently and bodes well for the markets to reach all time highs soon. The cumulative volume breadth indicator is already at new highs, which is often a lead to markets hitting highs, too.
Support levels held firm this week, we saw nice action from below as the 50 ma was tested along with the 20 ma. These pullbacks were good situations to discover if the dip buyers were still active, and on the SPX 500 that was indeed the case. The industrials tested the closer 20 ma this week and successfully closed above it twice, so that level is firm (call it 44,300). Small cap IWM has difficulty at the 230 level, and until that falls we have that to contend with.
The Internals
What’s it mean?
After such a strong day Thursday the internals tell us the market players took a rest. The VOLD was shot down from the start, and the ADD weak from the opening print. VIX did fall as we often see before a long weekend, put/calls were lower so that is bullish. Ticks were green most of the day, so buy programs were hearty. Key week for markets as they close in on new all time highs.
The Dynamite
Economic Data:
- Monday:n/a
- Tuesday:Empire State, home builder confidence
- Wednesday:Housing starts, building permits, Fed meeting minutes
- Thursday:Jobless claims, philly fed, leading economic indicators
- Friday:Flash PMI, consumer sentiment, existing home sales
Earnings this week:
- Monday:RIG, HUN, UFM
- Tuesday:BIDU, AXSM, MDT, FLR, EXPD, SPNS, CAG, ANET, OXY, DVN, TOL, HALO, UIS, CE, CDNS
- Wednesday:ETSY, SEDG, GRMN, WIX, FVRR, TECK, ADI, WING, CVNA, TOST, CAKE, BMRN, EXAS, BHC, VALE
- Thursday:BABA, WMT, U, W, BAX, NICE, JMIA, SHAK, LNG, MELI, RIVN, XYZ, NEW, BKNG, TXRH, GH, FIVN, DBX
- Friday:ARR, ASIX, UNTI, BDC
Fed Watch:
HUGE week for fed speak, no less than 11 speakers hit the circuit talking about monetary policy, inflation, the economy and growth. Most have already intimated they do not see a cut coming anytime soon, though Governors like Goolsbee say that ideal could change drastically if inflation turns downward. Was this a temporary situation in January or something more sticky? The February readings next month will be an important read.
Stocks to Watch
Volatility – Once again the VIX fell hard into a long weekend, we often see that paid back quickly after traders return, which will be Tuesday. It’s been a bullish condition with VIX under 15% and below the 200 day moving average, but we know that news could change that narrative quickly.
Earnings – A lighter calendar of earnings this week but nonetheless important. We’ll be watching retail and tech names this week as the focal point.
Economic data – Mostly about manufacturing this week, but certainly important to find out if the economy is slowing and perhaps bigger layoffs are just around the corner.
