The Fuse
Equity futures are a bit soft in the early going after the bulls kept the pressure on the bears Monday. We’ve often seen Mondays higher for the past few months so it was no surprise at all. However, the rallies are starting to slow down and there could be a whack day coming soon with markets nearly maximum overbought.
Interest Rates are slightly lower across the curve this morning and investors rebalance their portfolios following a pretty strong bond auction yesterday. The bond market continues to put pressure on long yields, daring the Fed to start thinking about cutting short term rates.
All eyes will be on NVDA today as the chip giant releases earnings to the world tonight. Microsoft seemed a big beneficiary of the OpenAI drama. Oil rallied sharply on Monday as did gold, which is higher this morning while the dollar is lower. Minutes from the last Fed meeting will be released today at 2pm EST.
Earnings out this morning from some retail names, Lowe’s beat but cut their full year guidance, Dick’s Sporting Goods had a nice beat while Best Buy was mixed. Later tonight is NVIDIA, Nordstrom, Autodesk and Urban Outfitters.
Thanksgiving holiday this week so this is a short week for trading, only 3 1/2 days. A great time to sell some volatility and keep your positions small.
Breadth was positive Monday but not screaming a buy. Gobs of breadth are certainly positive but the new highs were a bit lower on the day. This tells us big money buyers may be stepping back a bit to let the markets come in one more time.
Volume trends remain bullish as we continue to see higher levels of turnover on the up days. That’s a good sign if you’re bullish, and when we see breakouts in price as we did on Monday it’s even better, but remember big money is not there to top tick the market. In other words, expect some sort of pullback soon to let the dip buyers get into the game.
The SPX 500 has its eyes on 4,600 at some point soon and there is little resistance to reach that goal. However, if the markets are more overbought and that objective is not met prior, there will be plenty of disappointment to go around, and prices may fall back sharply. There are plenty of gaps to fill down towards 4,300 on the index.
The Internals
What’s it mean?
Not much to glean from the internals on Monday. It was an up session but as we can see nothing to overwhelming. The bulls have certainly been dominant of late and is seen in the breadth indicators. The VOLD and ADD were strong all session long though not trouncing the bears as we saw last Tuesday. In fact, over the past four sessions it’s been ho hum, and that’s concerning. The VIX fell again and is now dangerously low here, so a good whack is just around the corner.
The Dynamite
Economic Data:
- Tuesday: Existing home sales, FOMC meeting minutes
- Wednesday: Durable goods, oil inventories, Michigan consumer sentiment survey
- Thursday: N/A
- Friday: Global Flash PMI – November
Earnings this week:
- Tuesday: ANF, ADI, BBY, DKS, DY, HIBB, J, KSS, LOW, MDT, GES, HP, JACK, JWN, NVDA, URBN
- Wednesday: DE
- Thursday:N/A
- Friday:N/A
Fed Watch:
So many Fed speakers out last week I suspect they are tired of talking. In fact, nothing on the docket for speakers this week. We’ll have the minutes from the last Fed meeting out midday Tuesday. Current odds are favoring a rate cut in 2024 as the Fed’s next move.
Stocks to Watch
Volatility – Expect to see the VIX subdued this week as we often see during a shortened trading week. Volatility sellers get in front of the holiday, hence when the market re-opens next week there could be a giveback and higher VIX, which often means markets decline.
Retail – End of the week is Black Friday, otherwise known as the ‘Super Bowl of Retail’. We’ll have our eyes on Amazon, Walmart and other retailers who try to lure shoppers into finding early Christmas bargains.
Oil – Crude oil prices were up sharply last week and may continue this coming week. We see a rise eventually towards $85 a barrel, which could come soon on furious short covering and added buying.