The Fuse
Equity futures are moving sharply higher today as markets are looking for a followthrough day from yesterday’s huge reversal up. Breadth and volume are solid.
Interest Rates are moving up a bit today with the strength in the equity markets and a strong GDP print. High yield spreads are narrowing as that market senses no recession down the road. Fed futures are steady, 2’s are as well but the 10 yr is being stubborn around 4.2%.
Strong gains in Europe as this region followed the US markets higher. STOXX up 1.1% led by strong gains in Germany and France. The dollar is flat, gold modestly higher and silver running towards $100 again. Crude oil down below $60 but mostly profit-taking, stocks in Japan were up nicely, higher by 1.7%, Hong Kong and Shanghai modestly higher. Yields in Germany and the US long term held steady.
Earnings from GE and PG were good this am but those stocks are selling off a bit today on weaker guidance. Huntington Bank the same, slight miss while McKormick is really getting pounded on missed earnings. Tonight we hear from Intel, Capital One, CSX, Alcoa, Alaska Air, tomorrow SLB and a few mid-sized banks.
That was quite the turnaround, and it wasn’t even Tuesday! Stocks staged an about face following the prior day’s pasting, something we have come to expect from time to time. Given the overbought nature of the markets last week it made sense some fear would be struck, but the quick bounce back was nonetheless impressive. It was clearly stoked by President Trump, who did is best TACO impression once again.
Well, that’s the way you like to serve your breadth, hot and buttery! Yesterday was a clear rout of the bears, strong breadth and very few sellers getting in the way. Oscillators moved back into positive territory, new highs hammered new lows once again.
Even thought Tuesday was a heavy volume day, yesterday actually came in stronger for the IWM and SPY, hence a day of accumulation. Not out of the woods though, as there is potential for a turnaround day. As good as Wednesday was, it was still only a test of the 50 ma, but some followthrough would be very bullish and push the bears to the side. Would like to see a bit more accumulation from the Industrials and Nasdaq,
That big drop Tuesday was a doozy but it may have been enough to scare the living daylights out of the bulls. That is what you want to see, and then have the dip buyers come out from behind and do their work. No question the chart is looking shaky, but with a few more up days we can consider the Tuesday test a successful one.
The Internals
What’s it mean?
Doing it old school, the internals got some leadership yesterday from the VIX, which was hammered all day long and really took a tumble after President Trump knelt down on the tariffs. Not only did VIX fall but ticks were super strong, see the green in the NYSE, with buy programs all session long. ADSPD and ADD were steady, sharp contrast from Tuesday. The VOLD also finished strong, highs of the day. Followthrough remains the key.
The Dynamite
Economic Data:
- Thursday:Jobless claims, GDP first look, PCE (nov), income/spending
- Friday:Consumer sentiment, SPX flash services/manufacturing PMI
Earnings this week:
- Thursday:PG, GE, HBAN, ABT, MKC, ACM, NG, INTC, ISRG, COF, AA, CSX, BY, ALK
- Friday:SLB, ERIC, BHA, CMA
Fed Watch:
Plenty of fedspeak last week, pretty consistent with their views. We won’t hear anything this coming week as they are now in the ‘blackout’ period, the next fed meeting starts in a week. Fed futures not seeing a cut or hike happening at this next meeting, policy likely to be steady.
Stocks to Watch
Oil – Plenty of news surrounding oil and reserves, with Venezuela and Iran on the front burners. It appears likely that crude is on the upswing, perhaps to $65 or so and then higher if supply is disrupted.
Bitcoin – the big crypto currency has been on a roll since the start of the year and is trying to make another run at 100K. Speculators have been frustrated for the last few months as crypto currencies just don’t want to break out. Eventually it will happen.
Dow Industrials – Some big names this week but not tech-related. We’ll have MMM, JNJ, PG delivering earnings, it’ll be interesting to see how the ‘other side’ is living.
