The Fuse
ES futures are down sharply in an about face from last evening. When some solutions were announced to save the depositors at SVB, some relief was seen. However, volatility is rising sharply today and we are going to see some big swings this week. Buckle up!
Markets fell hard three of four days this past week and dropped to levels that put this January rally in jeopardy. Breaking the December lows is a huge bearish development, and that happened for the Dow Industrials on Thursday, the index also followed through with another deep loss on Friday. The SPX and R2K are within 2.5% of breaking the December low, which could hold if the oversold condition gets bought up this week.
Banks around the world are reacting to the Fed’s actions over the weekend. Futures shot higher at the start but tumbled lower after the market seems to be pricing in fewer rate hikes going forward. Was this the event that sparks a pause? I’m not so sure, the committee has plenty of data to look at over the coming days and weeks. If prices continue to rise the Fed will have to remain on its course of hawkish policy, and the markets won’t like it.
Not much to report on the earnings front today.
We have a ton of data out this week, but Friday is important as well, that is a big triple witching expiration of options, futures, index options.
Breadth was horrendous again, this indicator is on a strong sell signal. Breadth figures for March have been leaning bearish all month long, and that is simply not how a bull market runs. We are still mired in a bear.
Another day of distribution with sellers taking control from the outset. SPY volume was elevated for a second straight day, 5 days of distribution in two weeks means this market is now in a correction.
With a break of 3900 this week, we’ll see if that holds firm. The 20ma of the SPX 500 is now at 4019 and coming down fast,the last few with weeks the index was not able to close above it. Next up would be strong support at 3800-3805, then below that the December lows at 3764. If that breaks…ugly.
The Internals
What’s it mean?
Markets took a beating for the second straight day, 3rd time in 4. Notice the heavy selling in the VOLD and ADD, the ADSPD has seen a trend down day twice in a row, a rarity. But the put/call again clocked in above 1, which tells us finally investors are getting nervous and buying protection. The VIX shot higher but backed down, it’s now above the 200 ma.
The Dynamite
Economic Data:
- Monday: consumer inflation expectations
- Tuesday:CPI
- Wednesday:empire state manufacturing, PPI, retail sales, biz inventories
- Thursday:jobless claims, philly fed index, housing starts/permits
- Friday:IP/cap utilization,, LEI, sentiment, Eurozone CPI, labor cost index
Earnings this week:
- Monday:nothing spectacular
- Tuesday:LEN GES IHS
- Wednesday:OTLY ADBE FIVE
- Thursday:DG SIG FDX GME GRPN DBI WSM
- Friday:BLDP
Fed Watch: No Fed speakers this week as the committee is in the blackout period before their next meeting. However, the data is going to skew the fed funds futures, so we’ll be watching the movements this week.
Stocks to Watch
Name – SVB, which was halted last week
Name – SCHW, the stock was pounded this past week on contagion rumors
Name – VIX, which shot higher towards 28% Friday. Can it go back up?
