The Fuse
Equity futures are rising, first time all week they have been positive pre-market. Today is the last trading day of the month and quarter, after the weekend we will start trading the second half of 2024. Strong numbers for Nasdaq and SPX 500 so far. After the close will be some re-balancing and a large load of options will expire (quarterly).
Interest Rates are up modestly this morning as traders await the very important PCE report. Expectations are for a flat m/m PCE but if it is negative then markets may shoot higher and the prospect of rate cuts in 2024 may crystalize even more. This is an important data point for the FOMC. Fed funds futures now predicting two cuts in 2024.
Oil prices are up again as WTIC is now above $82 per barrel. The dollar is stronger early in the am, gold is also up along with silver. Stocks in Europe were up modestly overnight while in Asia markets saw green with the Japan Nikkei climbing .6%, Shanghai and Hong Kong up as well. Last night’s debate between President Biden and former President Trump was a disaster for Biden, and discussion about a replacement candidate has started.
Earnings last night from Nike were an unmitigated disaster. The stock is now trading at a two year low and is the worst performer in the Dow Industrials. This company is in trouble and is going to take a big hit.
Stocks were drifting back n’ forth yesterday as traders were trying to figure out a direction. Money flow is just not working at this time, trying to find a trend is a tedious task. Eventually a trend will assert itself, perhaps a bit more digestion from the prior uptrend and then the market may signal the next direction. It is more likely higher, but there is no clear sign as of yet.
Better breadth but not enough to take the MC oscillator above the zero line. That could happen today if there are more than 300 advancers over decliners, not a large bar to leap over. New highs are starting to rise vs new lows, but this indicator is not yet on a buy signal.
Better volume would be nice but we ARE in summer trading, so lower turnover is pretty normal. We should not complain much about the low volume, we are at the end of the quarter and may see a bit more turnover start showing up when earnings season gets underway in a couple weeks. It seems the market is just in a holding pattern here, a dangerous place if you’re not trading defensively and carefully.
After a few sessions of chop the lows are trying to be defended. Nasdaq has been strong of late, the NQ futures closed again above 20K. If that level holds before the weekend it’ll be a big deal. Russell 2K had a pretty nice session, up 1% and still has good support around 200 on the IWM.
The Internals
What’s it mean?
Improvement in the internals, the VOLD had a strong day, it’s first solid win since Monday. ADD was also strong while VIX headed lower. Ticks were mixed but more concentrated in the green, which bodes well for today. Put/calls are low but rose up end of day. With positive breadth and strong internals the markets will be on a buy signal starting the new month.
The Dynamite
Economic Data:
- Friday:May income/spending, PCE, Michigan sentiment
Earnings this week:
- Friday:N/A
Fed Watch:
Fed speak was out in force last week as the Fed governors pretty much stuck to their statement the prior week. It’ll be a month before the next meeting so plenty of data to divulge. We’ll have two speakers this Monday, three on Tuesday and another on Friday. Most likely the recent data will not yet convince the committee to cut, though markets are basically predicting a cut in September then one in December.
Stocks to Watch
Housing – Some pretty lousy home data last week and a bunch more coming this week. Could this be the tree that falls to start an economic slowdown? It could be, but if rates decline even more look for another cycle up to begin.
Sentiment – Consumer sentiment and Michigan sentiment will be released this week, and most consumers have been downright negative on the economy. Perhaps it is just a hunch or maybe just their situation, but if sentiment continues to deteriorate that may have consequences for equity and other markets.
Quarter – It has been a strong quarter for stocks even with a poor April. I’m sure the bulls would like to see a strong finish into Friday’s close. SPX 500 is up nearly 17% for 2024 so far, an amazing accomplishment following a strong 2023.
