The Fuse
Futures are getting hammered this morning in a ‘no bid’ market. Risk off seems appropriate here with weakness coming from overseas. As we come back after a holiday volatility is spiking here, internals were showing high complacency on Monday (see below).
Interest Rates are modestly higer after some softness in some economic data Monday and global economic data overnight.
China PMI data came in soft, worrying many that their post-covid recovery is slowing down. In addition, European PMI and global PMI were in line to lower as we come back from a holiday session.
Not much on the earnings front this week other than LEVI.
Short trading week but we’ll be paying attention to market volatility
Another strong day of breadth Monday even during a short session, this indicator is on a buy signal but is approaching overbought.
Modest volume at the end of the day but of course it was an abbreviated session and a pre-holiday one at that. We have seen good turnover of late as buyers continue to add on the dips.
A little consolidation here above 4,400 on the SPX 500 is a good thing. With little news to drive stocks higher or lower there is time to let the moving averages catch up to the current price levels. Support still around 4,000 on the SPX 500.
The Internals
What’s it mean?
A modest continuation from last week as breadth was once again outstanding. The problem is, we are not facing an overbought situation which can/will turn on a dime. The VOLD once again leading the way as is the VIX, which continues to remain low. Put/call sank hard on Monday but will likely bounce back when we return to trading on Wednesday. TICKS were very strong on Monday, too.
The Dynamite
Earnings This Week:
- Wednesday:
- Thursday: LEVI
- Friday: AZZ
Economic Data this week:
- Wednesday: FOMC minutes, ADP, factory orders
- Thursday: Jobless claims, JOLTS report, ISM non-manufacturing, service PMI
- Friday: Non-farm payroll report
Fed Watch:
The Fed watch tool is still telling us to expect a rate hike next month, and that is very likely. We heard from Chair Powell and other Fed heads this past week who reiterated a hawkish viewpoint. But the data is starting to turn dovish, albeit at a slow pace. This week’s job report will go a long way in determining how many more hikes are needed.
Stocks to Watch
Tesla – strong numbers out over the weekend might stoke a big rally for the EV car maker.
Semiconductor Stocks – As we heard last week, the Biden Administration is going to make it difficult for US companies to sell AI chips into China.
We’ll see if there is any followthrough.
Volatility – Again watching the VIX here as the holiday shortened week may carry some surprises, especially with an important jobs number coming up Friday.