The Fuse
Stocks are reeling much like they were a week ago today but for very different reasons. Tariffs were approved over the weekend against Canada, Mexico and China and a chain reaction was felt. In fact, we saw SPY and QQQ falling sharply after the market closed Friday (they trade for an hour afterwards). It all means more volatility, large and unexpected moves up and down that will cause emotional responses. In the end, we need to pay attention to the price action and the trend, which continues to be up.
Interest Rates are lower this morning as bonds represent the safety trade today. Yields dropping could be good news over the long term but bond buyers are looking for yield is a volatile stock world. Given the uncertainty around news events and releases it makes sense to hold bonds as well as cash.
With the heavy drop in US futures stocks across the globe have been feeling the pain (due to tariff implementation tomorrow). Stoxx in Europe were down 1.3%, France and Germany were lower by more than that amount. Gold is flat, crude is rallying by more than 2%, silver is flattening out. The dollar jumped .7%. Japan was pounded overnight, off 2.7%. China’s markets were closed.
Earnings will be center stage this week, names like Palantir, Google, Paypal, Spotify, AMD, Arm, Amazon and Lilly to name a few. It’ll be extremely busy, the biggest week o earnings releases so far this season.
This past week was full of eventful news, and stocks reflected some uncertainty then CERTAINTY after the Fed decision and some key earnings. Today starts a new trading month, we often see money flows heavy the first part of the month. Of course, January got off to a slow start following a dismal Santa Claus Rally, but markets did right the ship later in the month. This week is heavy with jobs data, the January focus on growth, wages and manufacturing. Also, another big week of earnings on the slate.
Breadth was horrible all session long and I told our chat room participants that sellers were lurking even as the markets were higher. You see, breadth is the fuel that gets the car running, money flow keeps it moving. For the most part, breadth had been pretty decent in January but this last day of the month was quite poor, nearly 3-1 negative. Oscillators are off their highs and sit just above zero. If they fail to hold that line more selling is likely.
Volume picked up on Friday, the last trading day of the month and a weekly expiration, too. We had some good price action all around but it seems the bulls got fatigued. That often happens when money is jammed quickly into stocks, there is little turnover to keep holding prices up and then they come down. As long as volume does not indicate more distribution (higher turnover than the prior day) then pullbacks are likely to be bought.
Support levels are being tested again, there are better levels below current prices. The Industrials could drop 1000 points and still be in an uptrend, the SPX 500 could test the 20 ma again at 5979, build a higher low on that move and have a decision point to move on. With this market in a firm uptrend that next move is likely higher. End of the month MACD on the SPX 500 remains in tact for the bulls.
The Internals
What’s it mean?
From the start of trading Friday the internals were in trouble. Notice the weakness in VOLD and ADD just about 30 mins after the open. Prices did not move much, but these indicators DID! Several red ticks hit at the end of the day, large negative ticks at -1000 or more. Put/calls started to rise again, that is bearish while the VIX is climbing as well. Just not a good way to finish the month.
The Dynamite
Economic Data:
- Monday:PMI final, ISM manufacturing, construction spending, Atlanta Fed Pres speaks
- Tuesday:JOLTS, factory orders, Fedspeak
- Wednesday:ADP, trade deficit, SPX PMI, ISM services, Fed speak
- Thursday:Jobless claims, productivity, Waller and Logan speak
- Friday:Jobs report, Bowman speaks, wholesale inventories, consumer sentiment and credit
Earnings this week:
- Monday:YSN, JOUT, PLTR, CLX, NXPI, RMBS, FN
- Tuesday:PYPL, SPOT, PFE, REGN, RACE, MRK, EL, APO, AMD, GOOGL, SNAP, CMG, ENPY AMGN, EA, PRU
- Wednesday:UBER, DIS, TM, BSX, JCI, F, QCOM, ARM, AMSC, VKTX, ORLY, ALGN, AFL
- Thursday:LLY, RBLX, COP, PTON, HSY, BMY, TPR, YUM, POWL, PINS, FTNT, AFRM, AMZN, ELF, NET
- Friday:CBOE, NWL, KIM, FLO
Fed Watch:
After last week’s Fed meeting we have a slew of speakers set to talk it up. This coming week is big for data, including the January jobs report. The committee’s decision to sit on rates for the first time since last July at this point was telegraphed, and the next meeting in March is likely to be the same conclusion. The data is going to guide them toward policy, right now it is in pause mode.
Stocks to Watch
Jobs Data – After December’s surprisingly good report the consensus is for something a bit less. Chair Powell and the committee seem pleased with the employment situation, 4.1% unemployment is a good place the for economy to continue growing.
Big Tech Earnings – We will hear from Amazon and Google this week among a smattering of other names in various sectors. Earnings have by and large been pretty strong this season with solid guidance. Let’s see if that continues.
Tariff Response – Tariffs are suddenly on the table, whether for real or a threat. Twice this week the stock market reacted negatively to the news, volatility rose up and pushed markets down for a time.
That has to be worrisome to the bulls but opportunistic to everyone.
