The Fuse
Equity futures are ramping up and following through after yesterday’s strong gains. Technology names paced the action Thursday and are pushing higher this morning. A second day in a row would be confirmation this rally is underway.
Interest Rates are moving downward today as bond buyers are back in action. After a scary feeling with the 10 year above 4.1% the yield is coming back down. Fed speakers were adamant about fewer rate cuts and even later in the year. A Fed meeting is in two weeks.
Tesla may be cutting prices on the Model 3, that stock remains under pressure. Apple got a nice upgrade yesterday and is following through after a strong move upward. Chip stocks are in favor, the SMH tagged an all time high on Thursday. Irobot’s acquisition by Amazon is being blocked by EU regulators.
Earnings this morning from Travelers were strong, the stock is up more than 5%. SLB numbers were also good aided by international gains.
Next week brings us a slew of earnings reports including many in tech.
It’s a short week of trading as Monday markets were closed for holiday. However, a big expiration week is upon us as LEAPS will expire this coming Friday on the close.
After some volatile, back n’ forth action the bulls finally found their spot to start adding risk exposure. On the chart that level was 4,740 on the SPX 500, a level to keep in mind as it may serve as good support. Some of the economic data was favorable yesterday and pointed toward a strong quarter release coming up (next Thursday). Keep in mind earnings season is in full swing next week and we are likely to hear some color about the year ahead from most about employment, inflation and growth.
Breadth was rather poor Thursday given the strong performance in the indices. But as we know the price action is the most important indicator and trumps all others. We still have breadth on a sell signal but this indicator has been swinging back n’ forth for weeks. The price oscillator on the Nasdaq went green but the breadth oscillators are still moderately oversold.
The trading range is still alive but the upside is now being threatened. At the open we may see the 4,800 level tagged and if there is a close up there it sets up a showdown early next week with all time highs. The highest closing level on the SPX 500 is 4792-94 and that could fall today. 4,600 still is support on the downside and then to 4,550.
What’s it mean?
Sellers were out early dumping stocks but when they finished the bulls took the reins. See the differential in the internals, the VOLD and ADD show a rare V shape on the day. We don’t often see these reversals happen intraday, but buyers certainly wanted in after midday. VIX was mostly down all session and look at the ticks, they showed the same bifurcation all day long. A followthrough day would be important for the bulls.
The Dynamite
Economic Data:
- Friday: Existing home sales, Michigan consumer sentiment
Earnings this week:
- Friday: ALLY, CMA, STT
Fed Watch:
Some outspoken Fed speakers were out last week preaching the gospel. The biggest message sent was their belief markets are being to aggressive with expected rate cuts, how many and how soon. The latter is of course based on the data while the former is also based on the data and how a reduction in inflation happens to coincide with a slowing economy.
Stocks to Watch
Financials – Friday was a hint of how bank earnings may hit this season: missing on the top line and beating on the bottom line. Plenty to digest this coming week.
Volatility – We’ll again be watching the VIX as it moved down below 13% once again this past week. That sort of complacency is often paid back following a holiday-shortened weekend.
Gold – The yellow metal had a strong Friday after some turmoil arose in the Red Sea area. We often see gold rising when such issues occur, and the metal is within spitting distance of new all time highs.