The Fuse
ES futures are modestly lower this morning after a quiet weekend. Boeing picked up a big Dreamliner order from Emirates while China is close to lifting a ban on the 737 max planes. Following a big day Friday above resistance traders are looking for some followthrough action.
Interest Rates are modestly higher as the bond market is shrugging off Moody’s signal on US treasuries to negative watch. This is likely to motivate Congress to avoid a government shutdown this coming weekend.
Moody’s put the US treasury debt on negative watch but continues to reflect AAA rating for US bonds. This came out after the close on Friday, not a shock as the company whacked our politicians for the games they have been playing. I suppose you have to use care and be less sloppy when you have 34 trillion dollars in debt, Moody’s is trying to send a message.
Some good results out today from Monday.com (of course it would be today!) and some weakness from Tyson. Later this week we’ll hear from Cisco, Walmart, Home Depot, Target and TJX along with Alibaba and JD.com.
Stocks celebrated some good data for once as the indices lifted above some very tough resistance. Rates have been coming down as more and more investors come around to the notion a recession is not imminent, and….dare I say it….a SOFT LANDING is very possible!
Breadth had been extremely poor all week long until Friday when a surge of buying pushed the markets to new relative highs. Strong breadth was responsible for the recent runup in early November so Friday’s action was nothing new. Still, a few more up sessions will put this indicator on a buy signal. Total breadth was a bit better than 3-1 positive.
Turnover was brisk as the buyers came in hot Friday with plenty of stock to buy in size. This was clearly an accumulation day, even as sellers swamped the market late on Thursday. That’s a key turnaround when the market is slammed and goes right back up. It’s very bullish. New highs are starting to expand as well.
So that 4,400 level was crossed and closed over for the first time in months. That’s a good sign for the bulls and now we wait to see if the moving averages catch up quickly or if the bulls fade this rally. Interestingly, we are not so overbought any longer which tells me we could rally a bit more into the Friday options expiration period.
The Internals
What’s it mean?
Strong internals to end the week positive is a good sign for the bulls. Ticks were the standout indicator on Friday with green everywhere, though the ADD and VOLD were impressive as well. The VOLD early in the week had negative days but Friday was a clear positive. VIX declined sharply and may be in for more downside soon if the inflation numbers next week are taken positively. TRIN came off a very high reading and is back nearly in balance (at 1).
The Dynamite
Economic Data:
- Monday: Consumer Inflation Expectations
- Tuesday:CPI, Small Biz Optimism
- Wednesday:PPI, retail sales, empire manufacturing, business inventories
- Thursday: jobless claims, philly fed index, import/export prices, ind production/capacity
- Friday: housing starts/building permits
Earnings this week:
- Monday: HSIC, MNDY, TSEM, TSN
- Tuesday: CSIQ, ENR, HD, SBH
- Wednesday: AAP, TGT, TJX, CSCO, KLIC MMS, PANW
- Thursday: BABA, BBWI, M, WMT, WMG, AMAT, BHZ, GPS, ROST
- Friday: BJ, BKE, FL
Fed Watch:
A pretty loud roar by the crowd on Thursday after Jay Powell doused cold water on the markets. What did he say that caused a panic? Nothing different than last week, which said the committee remains vigilant and is looking to eliminate high inflation, and will keep rates higher for longer. Maybe the market was looking for some softer language, but Powell and his colleagues were not going to offer it. Plenty more Fed speakers this week with NY Fed Williams out early.
Stocks to Watch
Inflation – For one of the first times in a few years CPI is expected to rise less than 2% on an annualized basis for October. That may soothe the Fed for a bit, but frankly we would need to see more data than just one month. It’s a good start and moves in the right direction. Core CPI remains a bit hot.
Options – It’s a big expiration week on Friday and we have some large open interest that is now in the money. Will these holders turn the screws on the bears and push the markets up towards 4,500?
Retail – Big retail names report earnings this week like HD, TGT, WMT and TJX. Further, we’ll have a retail sales report out on Wednesday which may give us a good read into holiday shopping as black friday approaches.