The Fuse
Equity futures are up modestly following a mixed session on Monday. The bulls are trying to remain buoyant here with having a second straight close above key levels. The CPI today is likely to be a market moving event.
Interest Rates are modestly lower this morning as traders/investors await the very important October CPI report. This month’s reading is expected to drop sharply and reflect an annualized month/month number far less than the Fed’s 2% objective.
As we come closer to a potential government shutdown (this weekend) there is worry about a some real damage being inflicted to the economy.
Perhaps the veiled warning from Moody’s last week is enough incentive to get a better deal done than a 45 day extension.
Earnings this am from Home Depot came in better than expected but the company guided very conservatively for the coming year. That’s understandable with so much uncertainty surrounding the consumer and the economy.
Nothing much to speak about yesterday as many traders were holding their breath following a negative watch signal from Moody’s on US treasury debt late Friday. Bonds were not down much on the news, just some jostling and repositioning in front of volatility and before some big economic data comes down. Further, some important earnings hit this week (mostly in retail names).
Breadth was poor most of the day and did finish negative but barely. Was that a positive situation following the strong day Friday? Not really, but we could not expect to see so much more upside following some very strong sessions this month. A few more up days with strong breadth would turn this indicator bullish.
Very mild turnover on this Monday session as we could view this as a consolidation day following a strong Friday. With low turnover and on mostly a down session it tells us big institutions were not in there selling. That’s pretty bullish eventually.
The 4,400 level was touched yesterday but did not break on the close, and that sets this mark up as good support for now. As the moving averages catch up to the price action we’ll see how market players deal with support. But eventually the bulls will want to see markets rise up and make higher lows, establish an uptrend and make higher highs.
What’s it mean?
After a pretty ‘blah’ day Monday we are looking for some better pace and action later in the week. You can see from the VOLD and ADD how price was strangled all session long. Neither bulls nor bears had an advantage on the day. Ticks were mostly even as well, VIX rolled a bit higher early in the day above 15% but only had a negligible gain. Today’s CPI might be a barn burner.
The Dynamite
Economic Data:
Earnings this week:
- 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.