The Fuse
Equity futures are lower this morning but well off their overnight lows. Seems quite a bit of volatility is coming into markets lately and not just in the precious metals markets. Gold and silver cracked lower on Friday and big swings continued today. This instability is giving rise to the VIX which is embarking on another up trend, not bullish for markets.
Interest Rates are modestly lower this morning as investors flock to bonds for some safety. The short end of the curve is also slightly lower, a bit surprising after the hot inflation reading. High yield spreads are moderately tight still, 2/10 spread is steady and the fed funds futures market remains static, looking for the next cut in June.
Stocks in Europe were down with the US market closing lower on Friday, the Japan index down sharply, off 1.2% while Hong Kong lost more than 2%. Crude oil is off 5% while gold is up slightly after a violent move overnight, same with silver. The US dollar is up slightly, 10 yr yields on US treasuries down 1-2bps.
Earnings calendar is crowded this week, Disney reports today along with Palantir, NXPI, Fabrinet, Simon Property and Rambus. Tomorrow it is Paypal, Pepsi, Merck, Eaton, Pfizer and ADM. Later in the week Alphabet, Amazon, Arm and Qualcomm among others.
Extra volatility this week as markets struggled to move higher. Yes, the 7K level on the SPX 500 was tagged during the week, first time trading there but it seems buyers are struggling to add stocks. That could be a problem as seasonal trends start to shift bearish. Given the heavy week of earnings coming up and important data we should be watching there could be a big shift ahead – downward.
Breadth was poor all day but did manage to rally some and finish with less of a loss. Regardless, breadth is now on a sell signal and that means we could be in for a bumpy ride. Oscillators are negative once again and not quite bearish enough for a turn. New highs remain positive but just barely now.
Heavy turnover in the IWM and SPY on Friday tells us these were distribution days. That is where big institutions are letting go stocks in a big way, with conviction. There was not the same signal in the Nasdaq nor the Industrials but clearly these indices were down enough to cause concern. More downside on heavy volume on the first trading day of the month could be trouble.
Looking again to the 50 ma for levels of support. We recently tested those levels, the Nasdaq and Industrials almost on Friday but cleared above. If that level does not hold then a lower high and lower low will be established. Yes, a downtrend.
The Internals
What’s it mean?
Another poor day for the internals but notice the rise in put/call. That indicator has been climbing over the last few days and would be troubling for the bulls if it keeps going. VOLD was miserable Friday, VIX was higher and the ADD weaker. Notice the TICKS, whic hwere dominant red all day. Not good for the short term trend.
The Dynamite
Economic Data:
- Monday:auto sales, flash PMI, ISM manufacturing
- Tuesday:ISM services, JOLTS, services PMI
- Wednesday:ADP employment
- Thursday:Jobless claims, Fedspeak
- Friday:NFP for January, wages, consumer sentiment, consumer credit
Earnings this week:
- Monday:DIS, IDXX, TSN, HES PLTR, TER, NXPI, FN, SPG, DVA, RMBS
- Tuesday:PYPL, PEP, MRK, PFE, GLXY, ETN, MPLX, HUBB, IT, AMD, SMCI, CMG, ENPH, LITE, AMGN, LUMN, DOX, PRU
- Wednesday:UBER, LLY, NVO, BSX, JCI, ABBV, ADNT, CTSH, CME, UBS, GOOGL, ARM, QCOM, ORLY, SNAP, COHR, ELF, CCI, FLMC
- Thursday:COP, BMY, ENR, SHEL, CX, CI, EL, LIN, AMZN, IREN, MSTR, RBLX, RDDT, BE, AFRM, TEAM, MCHP, GOLD
- Friday:CGC, ROIV, CNC, CBOE, BIIB, NVT, UAA, TM, AN, PAA
Fed Watch:
The committee managed to get by last week without cutting rates and seemed to have done the right thing. There is little doubt now that inflation is still a problem and lower rates will only magnify the problem. Next cut expected in June, but that will have a new Fed Chairman as well.
Stocks to Watch
Precious Metals – Was Friday’s pasting just a fluke or profit taking? It’s hard to tell but more downside is certainly going to be bearish.
Amazon and Alphabet – Two more Mag 7 names reporting this week, we’ll see if they move into the Meta camp and give investors something to shout about.
Bitcoin – The big crypto has fallen hard of late and over the weekend tested a breakout level of 78K. If that does not hold firm and find buyers there is a long way down, and much of the market may go with it.
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