The Fuse
Equity futures are powering ahead as a couple of indices are trying to make a run towards all-time highs. The SPX 500, Nasdaq 100 and the Industrials are all within 2% of record highs. With a bit more jet fuel we’ll see that happen within days.
Interest Rates are holding steady this morning as yesterday’s jobless claims may have revealed signs of slowing in the US economy, which may spur the Federal Reserve to start thinking about cutting interest rates. The 10 year yield has fall 8 of the last 10 trading sessions. Bond auctions this week were mixed, some were pretty good (Thursday) and taken well. Later today we’ll have a slew of Fed speakers along with consumer sentiment index.
Markets around the globe rallied last night and into this morning. Japan was up nearly .5%, India up nearly the same while shares in Hong Kong were sporting a 2.3% rise. European stoxx rose up, markets across the region higher by nearly .75% on strong turnover. Gold is rising sharply, up more than 1.6% while crude oil also gains ground. It seems markets are in alignment about global monetary policy as earnings continue to come in.
Reports this week have been a mixed bag, last night Unity beat but said they expect an annual decline in sales, Roblox was horrible yesterday morning with guidance, this morning Enbridge beat on revenues/earnings and reaffirmed their full year outlook.
At the open bell it sure seemed like the bulls had lost control. After all, Wednesday’s session was pretty muted but the indices did manage to make some headway from the lows. That also happened yesterday, the indices put in their low during the first twenty minutes and rallied the remainder of the day. But, with volatility so low the ‘explosive’ move up that we are used to seeing and feeling is just absent. With some more volatility we’ll have those opportunities.
A pretty good day of breadth as the Russell 2K once again led the way in this category. This indicator is right near all-time cumulative highs, that means we should see a new index high relatively soon. Oscillators turned up and continue to remain on buy signals, and not overbought yet. New highs are trouncing new lows.
Volume remains minimal and that is a worry as the market continues to rally. Why is that? These prices up here remain vulnerable to short term sellers. In other words, the big money is not really participating as much, preferring to wait for a market selloff to then add stocks (into the strong hands). That often works during seasonally strong periods when dip buyers are active. As of now, we are trying to see if short covering rallies will stimulate more buying. A new all time high might just accomplish that task.
An impressive close for the SPX 500 above 5,200 and now within striking distance of all-time highs. Above 5,265 there is no resistance, but if the market is overbought at that point we could see some selling occur. Given the recent strength in the Dow Industrials, this index scored its seventh consecutive up day, there is little doubt this index will reach its highs within a few trading sessions. The Dow has been leading the charge.
What’s it mean?
In what seemed like a slow-motion day turned into a pretty solid bull rout at the finish. SPX 500 quietly closed up 30 points, the Industrials up a 7th consecutive day and within striking distance of new highs. The VOLD was pretty strong all session but it was the TICKS that really impressed. Take a look here at these green ticks, very strong while the VIX sank further, and is now below 13%. Put/calls also went down and are near a buy signal. ADD finally finished strong. Today’s action could be telling for the remainder of the month.
The Dynamite
Economic Data:
- Friday:Michigan Sentiment
Earnings this week:
- Friday:ROAD, DOCN
Fed Watch:
Following a quiet period where speakers were silenced before the Fed meeting, we’ll have several unleashed on the public this week. No less than 10 speakers talking about the economy, inflation and monetary policy. Before last week’s meeting these speeches were watched carefully for any hint of policy shifts, and that pushed the markets around as volatility rose. Look for more of that this coming week.
Stocks to Watch
Apple – Following last week’s big earnings beat, buyback and rise up Friday the company has an event this week (Tuesday), likely about iPads but then we could hear about AI again and other new tools, maybe even a new iPhone coming out later in the year.
Disney – Last quarter this company finally delivered on the top/bottom line. They report again this week and we should see continued improvement in their earnings, revenue from parks and entertainment.
Gold – The metal has suffered a downturn and is now trading below $2,300 per ounce. If inflation is truly coming down then we’ll see gold moving lower, perhaps this recent 7% drop is telling us that already.
