The Fuse
Futures are showing strength following a massive gain on Tuesday. The CPI came in weaker than expected and like exactly a year ago markets rallied sharply on that news. We are clearly overbought here but could rally a couple more days before a retreat, but the trend is clearly UP.
Interest Rates are up slightly after some big drops in long rates yesterday. Perhaps some profit taking but the long end of the curve is starting to get pulled down, which means the market is trying to price in rate cuts for 2024.
Markets rallied overnight as inflation data weakness stoked buyers to join the ‘risk on’ frenzy. Oscillators are deeply overbought so that is a red flag warning. However, strong market action can ignore other things for awhile. Retail sales will be released today for October.
Better than feared earnings from Target have that stock up sharply this am. We added this name recently in the EO portfolio and are looking to bank a nice winner today. Later today we’ll hear from PANW, CSCO and SQM, tomorrow morning we’ll have WMT, M, BABA and WSM.
An amazing rally that pushed the SPX 500 above the 4500 level at one point, it appears that ceiling will be breached early on Wednesday.
A very strong response to a lower than expected CPI has the bulls re-engaged in taking the markets higher. Solid statistics and finally some participation from the small caps, the IWM up more than 5% on the day.
Wow! Just WOW. An amazing day for the bulls with dazzling statistics to go with it. From the start, the breadth was positive and never really let up. That is impressive, but a 26-2 trouncing of the bears was astonishing. Gobs of breath are very bullish, and this could continue on for awhile.
A solid day of volume as the bulls racked up another accumulation day. Turnover was 35% better than Monday, which tells us buyers were sitting there just waiting to pounce. We don’t expect to see too much more heavy turnover but perhaps bigger volume comes late in the week following some big earnings releases.
We knew that push higher from the 4,400 level was going to produce some big things, but not all in one day. Yet, that is what we had following the very mild CPI report, and much like last year at this time the bulls were off to the races from the start. It was an impressive run with very broad participation. Perhaps more up to the 4,600 level is in store.
What’s it mean?
An amazing day for the bulls as they broke the ceiling and kept on going. There is something incredibly bullish about a 2% day up, and the internals show it. Look at the VOLD here, very strong into the close while the ADSPD shows a trend up day. We saw the put/call and VIX collapse hard, that signals buyers just piling in. We’ll see if there is more to the upside here.
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.