The Fuse
Market futures are up modestly today as traders/investors digest the prior days gains. With markets up strong early this week we might see a sell the news effect following the Fed meeting and policy release. The market is expecting a rate increase.
To the upside, the Nasdaq is making a run at 13K, a level it has not seen since August. That level is going to be strong resistance, while the R2K has been on the move lately is still in a severe downtrend. 170 is pretty strong support. The SPX 500 closed just above 4K, a key level to close above today.
Banks and their troubles continue to be the headline. Market players are doing a nice job shaking it off, preferring to position themselves positively for the upcoming earnings season.
Strong earnings from Nike after the close yesterday, this stock was up about 3-4% but gave up some of those gains.
Today is the day we hear from the Fed as the committee meets for the second time in 2023. This time around, expectations are for the FOMC to back away from rate hikes, though the consensus says 25bps higher later today, bringing the funds rate to 4.75%.
Another positive day of breadth puts this indicator on a buy signal. Breadth has been responsible for setting the stage of several rallies over the last few months.
Volume was down sharply yesterday vs the last couple of sessions. No doubt traders are waiting anxiously to see what Chair Powell has to say about monetary policy.
As we move upward into a new quadrant of price, we can consider prior resistance levels as newly found support. With the SPX 500 closing above 4000, another close higher would solidify that level of support for now. Resistance comes in at 4100 and prior January highs around 4192.
The Internals
What’s it mean?
In a virtual repeat of Monday, internals were very strong again with a big down move in VIX and put/call ratio. VOLD was strong all day long, punishing the bears. Ticks were surprisingly very strong yesterday with heavy buy programs hitting in the latter part of the session.
The Dynamite
Economic Data:
- Wednesday: FOMC decision on rates
- Thursday:Jobless Claims, new home sales
- Friday:Durable Goods, Global Flash PMI
Earnings this week:
- Wednesday: WOOF, CHWY, WGO, OLLI, SHOE, KBH
- Thursday: ACN, GIS, DRI
- Friday: XPRS
Fed Watch: It’s the second meeting of 2023 and plenty to discuss around the table. Will the FOMC consider the banking issues a systemic problem and pause on rate hikes, or will they continue to fight inflation with impunity? Markets are waiting for it and the projections for the year, too.
Stocks to Watch
Nike – big retailer reports earnings this week, looking at China outlook (which was better last quarter).
Federal Reserve – committee will talk about inflation and their objectives over the coming year.
Bonds – Yields are creeping higher once again.