The Fuse
Equity futures are mixed with the Nasdaq higher, Industrials lower, but small caps up slightly. Today is options expiration for February with about 2.7 billion set to come off the board today. With the VIX only mildly lower we may not see too much of a wide range today.
Interest Rates are sliding downward today into the weekend after a rather wild week. Inflation continues to be a problem for the economy, we heard as much from several Fed speakers this week. Fed futures still barely pricing in one rate cut in 2025.
Stocks are slow to get going this morning after a slight gain in Europe, STOXX were higher by .2%. The US dollar rose up .2%, gold is backing away from all-time highs, down about .5% while crude is down about .8% in a volatile session. German 10 yr bund yields fell 3bps as did US treasuries, stocks in Asia were higher with Japan up .3%, Shanghai gained .8% while Hong Kong was up a whopping 4% in heavy trade.
Earnings last night from Mercado Libre and Booking.com were solid as they also presented strong forward guidance. Rivian posted solid numbers but missed as did Block, which is down sharply in the pre-market.
We were a bit concerned about the markets after yesterday’s finish on lighter volume and poor overall statistics.
Out of the gate the pressure was on after weaker earnings from Walmart and other names, and in the first hour several sell programs hit and knocked the markets down about 1% early. The indices crawled back and recovered some losses but in the end a sharp loss just before the end of the week.
Breadth was poor all session long but did recover towards the end of the day. Nevertheless, we saw oscillators fall towards the zero line or negative on the Nasdaq, which sets up for more downside action. Will it be today? Hard to say but we’ll have to monitor the day trends to see what is in store. New lows are starting to mount a rally..
Tough to see the markets rising higher if volume trends are not bullish. That was the case here recently with hitting new highs on low turnover, which is a bearish divergence. Does it matter? Sure, eventually it does as buyers tend to shy away from high stock prices, then suddenly the sellers take control and we see nasty market action. Volume levels are likely to rise today with options expiration.
We had a nice swoosh lower yesterday on some good volume early in the day, testing the 10 ma on the SPX and QQQ before rising up from support. Still, lower highs and lower lows on the day are not bullish. We continue to believe some lower levels need to be tested and the longer it takes the worse off the next pullback will feel.
The Internals
What’s it mean?
Just atrocious internals all day long, the VOLD typically moves better than this but it was lethargic. So was the ADD, which closed at the highs of the day but still negative. That won’t get the bulls enthused. Ticks were mostly red today but did manage to even out end of day, ADSPD was negative but closed at its highs, perhaps some late short covering.
The Dynamite
Economic Data:
- Friday:Flash PMI, consumer sentiment, existing home sales
Earnings this week:
- 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.
