The Fuse
Equity futures are rallying a bit this morning following the monster up session Thursday. That move was driven by NVIDIA, and really set the table for a huge swing higher. Though the internals were not overwhelmingly good, we did have positives across the board. A weekly close at a new high is about as bullish as can be.
Interest Rates are modestly lower as bond buyers step back in. Rate cut odds have come off recently as the market now sees the first cut coming in July. We are not sure of the timing nor believe there is any use in predicting it, but if the market is wrong there will be some painful days ahead, like this week and last.
Oil prices are lower as worries over demand spill over prices. Crude has been on a nice run recently. Fed speakers were out in droves yesterday, late in the day Fed official Chris Waller said ‘there was no hurry’ to cut rates following stronger than expected inflation and economic growth.
Very strong earnings and guidance from Block (SQ) last night has that stock lifting higher today. Some higher priced names are getting clipped though, Booking and Mercado Libre are shedding some big dollars, but we’ll have to see how that goes – it could be a nice buying chance. NVIDIA is still on the move and is helping to lift tech. A close at a new high with good breadth today would be a huge positive.
A tremendous performance following some dull trading early in the week. The SPX 500 and the Dow Industrials both closed convincingly at new all time highs, the Nasdaq also closed higher as that index moved up more than 2.5% on the day. That is some move for a large cap index, but thanks to the strong report from NVIDIA Wednesday there was a buying frenzy. We’ll see if today has a bit more left in the tank.
One would think breadth was smoking hot yesterday but that was not the story. It was positive but not overwhelming, since early in the week it appeared the bears would get the upper hand. That was certainly not the case yesterday as the bears laid down their arms, and with the end of the month approaching (one week left of trading in February) the trend is looking bullish. The internals (see below) show bullishness but some exhaustion, too.
Volume trends were bullish all session long, all four indices scored an accumulation day. That is meaningful as it puts an end to the bears’ attempt to derail the current rally. Turnover on the Industrials was impressive as was the SPX 500 but it was the Nasdaq that led the way with big numbers and nearly closing at the highs of the session. Very bullish and if there is continuation we will see even more highs.
With the SPX 500 blasting right through 5K again with emphasis we see the market has left 4,900 support in the dust. Right now as I see it 5K is going to hold firm for now, and yesterday’s low near 4,950 would be the next logical stop on a corrective move down. The Nasdaq has support at 17.5K.
The Internals
What’s it mean?
A very strong price action day, and that tells us more than the information from the internals. Though we like to have these boxes supporting the price action, it’s not 100% necessary. However, the indicators do show a bullish bias from Thursday, and that is a positive for the bullish case. VOLD finished strong as did the ADSPD, ticks were green most of the day. But the VIX did move off its lows, I expected to see it flatten or move lower. Perhaps that happens in the coming days though, but this was certainly a huge win for the bulls.
The Dynamite
Economic Data:
- Friday:N/A
Earnings this week:
- Friday:BLMN, SSP, WBD
Fed Watch:
FedSpeak the last couple of weeks has been trying to push the market towards more conservatism on monetary policy, but that hasn’t worked out too well. But the data this past week finally shared their sentiment, which is be mindful of excessive inflation, and we will only start cutting rates when inflation starts to fall towards our target. The CPI/PPI clearly tell us that is not happening now. Fed funds futures have backed off a bit and are not seeing 5 rate cuts for 2024 any longer.
Stocks to Watch
Interest Rates – After last week’s very hot inflation readings for January all eyes will be on rates this week. Without much to push rates higher we’ll see if bond buyers come back during this shortened trading week.
NVIDIA – Wednesday is the big day for this semiconductor company, which is now the third most valuable stock in the world. As NVDA goes so goes the rest of the market for the remainder of the month. Will it be sell the news or something different?
VIX – We have seen a slight uprising in volatility the last month or so, just very subtle. It is similar to the move a couple of years prior before a sharp rise up. Was last Tuesday’s moonshot an anomaly or the start of something bigger? The next several days will test out a theory.