Market Blast - March 7, 2023 - Explosive Options

The Fuse

Futures are modestly higher this morning as market players are waiting anxiously to hear what Chair Powell has to say. Will he comment on Fed policy or the latest economic data? This twice yearly testimony will be in the Senate today and the House tomorrow. Oscillators pulled down on Monday and are mildly oversold, but that should be expected after such a strong move higher by markets late last week. To note, the oscillators were so oversold last week that even at yesterday’s high the breadth was still poor, and did not cross above the zero line. That could mean buyers are done for now.

The SPX 500 tried to make a run at 4100 yesterday but fell short of that objective. Therefore, we are looking for that level to push on over the next week or so. Today is going to be difficult as there is very little bid in the markets, volatility is moderately higher.

Oil prices are lower early this am as is gold. European stocks rallied modestly while Asian stocks were mixed. German manufacturing data fell vs January. JOLTS, ADP and the beige book will be important data points tomorrow.

Strong earnings from Dick’s sporting goods this morning (we have this position in the EO portfolio). Dole reported earnings as well. What was notable Dick’s said inventory levels are back to normal, Dole said supply chain issues are virtually gone.

Testimony by Jay Powell this morning in the Senate, we’ll see what he has to say about inflation and the economy. Jobs data will be the theme for most of the week.

Breadth pulled back sharply on Monday but still remains on a buy signal. The oscillators are still negative, we could see a modest pullback here over the next couple of sessions.

Volume trends are turning bullish. There has been strong buying over the last couple of sessions, concentrated in several groups. That sort of broad participation is bullish, at least in the short term.

After three rather strong bullish sessions the stock market may be tiring out a bit. We can see 4100 as strong resistance, even a bit below that level.

The Internals (click chart to open in a new window)

What’s it mean?

After a couple of strong days for the bulls it seems as if they buyers are exhausted. notice the VOLD, starting low and then marching into negative territory late in the day. Sell programs were persistent. VIX was low all day but that simply means protection is not in vogue now. We are in a holding pattern, the SPX 500 stuck between 3800-4100.