The Fuse
Equity futures are ripping higher this morning after it appears a deal may be struck to end the government shutdown. That timing is important as layoffs around the country have started to put an economic strain on the consumer. We saw a nice reversal on Friday from red to green but today is going to require some followthrough.
Interest Rates are higher this morning as bond investors shed fixed income instruments for more risk on assets. Yields on the long end have stabilized for the most part, the 2 yr still looks to be in an uptrend. High yield pulled back some but spreads still remain tight, fed funds see a better than 2-1 chance of a cut next month.
Stocks are pointing up this morning helped by a 1% gain in the European STOXX index, paced by strong gains in France and Germany. FTSE also added .6%, in Asia stocks were also higher with Japan jumping by 1.3%, Hong Kong up 1.6% and Shanghai gaining .6%. Gold is ripping higher, up nearly 100 bucks and above 4,100 as silver tags 50, crude up modestly as the dollar index fell .1%. Yields in Germany and the US are higher, 2 bps on the bunds and 4bps on US 10 yr.
Earnings move into a new phase but some important names will hit the confessional. Cisco and Disney are the headliners, we’ll hear from some of the small cap high energy names like Rigetti and Oklo along with Williams Sonoma and Ross Stores. A big release of earnings but smaller names.
Will they or won’t they? The government shutdown appeared to be in line to be resolved, and the stock market was sniffing out a solution. It doesn’t matter that Nasdaq stocks were oversold, market players were looking for some sort of catalyst to get stock moving again. As it stand, the 50 day moving average test is alive and well, if we hold above there and confirm then there is a huge hammer reversal to the upside and some gaps to be opened to the upside.
Breadth was good not great Friday as the oscillators remain challenged. That could change today with a strong move up tilted to the bulls advantage. New highs have slowed down sharply, this indicator back to neutral. Seasonal trends are bullish now, we’ll see if that matters.
Volume was good not great until midday when the buyers stepped up and ran the markets higher. We may see more strong turnover this week if we get some economic data released.
As we called before the 50 day moving average was the line in the sand, and that level was tested successfully on Friday. We did not see too much volume to the downside at that moment as the VIX peaked, so there is a good chance the 6660 area will stand as good support. Problem here is the SPX 500 closed below 6750 on Friday, a very key level of support that was broken Friday. A snap back above there would be bullish.
The Internals
What’s it mean?
A strong finish for the internals with the VOLD and ADD peaking right at the close, some heavy buy programs and short covering responsible for the action. Also, the VIX fell sharply all day and finished on its lows. Ticks were a tale of two cities, heavy red early and heavy green in the afternoon. We’ll see if that carries over to this week. Put/calls remain elevated, put buyers continue to add options on futures for downside protection.
The Dynamite
Economic Data:
- Monday:N/A
- Tuesday:NFIB optimism, Michael Barr
- Wednesday:Fedspeak
- Thursday:CPI, jobless claims, Fedspeak
- Friday:Retail sales, PPI, fed speak, biz inventories
Earnings this week:
- Monday:MNDY, VG, RGTI, CRWV, WULF, OXY
- Tuesday:SE, BYND, OKLO, PXLW
- Wednesday:CRCL, INVZ, GILT, CSCO, CCAP, LB, PAAS
- Thursday:DIS, JD, PSFF, PLX, CSIQ, AMAT, NU, BZH
- Friday:TWST, MKT, SH
Fed Watch:
Not much data to work with but it appears the Fed is locked into a rate cut in December, only because they have been commenting about the weakening labor market. Some data put together by the Chicago Fed showed this to be true. Lots of fedspeak this week though, we’ll get a good read on their views.
Stocks to Watch
Tesla – After giving Elon Musk his desired pay objection of 1 trillion dollars, we’ll see if Tesla responds and starts moving upward. The stock has been strong in 2025 and is not far off all-time highs.
Bitcoin – the crypto tested the 100K marker this week and helped to drag the other markets down with it. We’ll need to see a basing period first and then see if the crypto currency rises up.
Nasdaq – Coming off the worst week since April, technology names were blasted this past week after many posted some very robust earnings. Can they bounce back? Certainly so but it will take better money flows and volume.
