The Fuse
Equity futures have been all over the place but are trading in a 70 point range overnight. The wild swings are going to be with us for some time as VIX remains elevated, it is currently at 27%. Today is a big options expiration day, double witching.
Interest Rates are falling as money is being pushed into a safety trade situation. Equity flows are slowing down as one would expect and finding a home in fixed income. @/10 spread is starting to rise again and is more than 50bps apart, economists pay attention to this one closely. High yield is starting to correct, this may signal trouble in the economy.
Stocks in Europe declined last evening, the STOXX off 1% on heavy volume led down by Germany and France. Japan also dropped, off 2.4% while China had the same steep losses. Gold is off slightly, silver down more and 2% while crude continues its decline. The US dollar index fell .2%, Yields declined in German and the US 10 yr by 2 and 1bp respectively.
Earnings from Intuit last night were pretty strong as were results from Ross Stores. Gap also beat and raised, Veeva is getting smashed on weaker guidance.
Just as it appeared the markets were going to make a positive turn this week the bears reminded them it won’t be all that easy. A nasty reversal on heavy volume had the bulls flying out of control on this Thursday, not even NVIDIA’s strong earnings could help. That stock had its own nightmare trading session itself, rising 5% but then closing down about 4% on very heavy turnover. These reversals are not common and tell you more about what happening at the moment, the winds are shifting to bearish.
AS you might expect the breadth was bad again, as it has been all week long. It was poor to start the day and just go worse, 5-1 negative is not what you want to see if you’re bullish. Oscillators ticked lower again and are back in oversold territory, but they can go even lower. New lows just slamming new highs, this indicator remains bearish.
Volume eased a bit so even as the markets were higher it could not be counted as an accumulation day. No matter, we could see a followthrough day here that has bigger turnover and that would spark a rally of sorts, there is a good chance of that happening before next week’s Thanksgiving holiday. Shortened trading and volatility selling. Next week turnover should relax, but this Friday probably prints big with options expiration day.
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The Internals
What’s it mean?
For the markets being up those were ugly. VOLD was punk all day and closed poorly, that may change today. ADD was weak as was ADSPD, just no oomph in this market. TICKS were mostly red, the VIX did fall and may continue today, that’s a plus for the bulls. Put/calls remain well juiced, put buyers are around.
The Dynamite
Economic Data:
- Thursday:September labor report, existing home sales, leading indicators, fed speak
- Friday:More Fedspeak, SPX pmi, consumer sentiment
Earnings this week:
- Thursday:WMT, ZIM, SCVL, ALLT, WMG, VIPS, BULL, VEEV, CPRT, GAP, ESTC, UGI, INTU, TEN, POST, ROST
- Friday:BJS, VFS, MNSO, FRO, AZIA
Fed Watch:
Lots of concern that inflation is starting to run hot. That has spooked several fed members as they offer a ‘wait and see’ approach at the final meeting of the year next month. Can the committee resist the market’s desire to cut one more time? If we look at the 2 yr the market there is saying ‘slow your roll’ while fed funds still expect a cut, it’s only 50/50 now. We may see a change in the odds later in the week as more data is released.
Stocks to Watch
NVIDIA — We have to pay attention to the ‘King’ this week, reporting earnings after the close Wednesday. Lots of interest in this name but they can also pull up other semiconductor and AI-related names, too.
Bonds — It’s possible we get several data releases this week and that might move fixed income. The equity markets are mostly oversold here so any lack of bad news is going to stimulate buyers.
VIX — I’m watching the VIX closely this week along with nasdaq volatility, the VXN. We have seen a rise here as many are getting uncomfortable. Perhaps an opportunity is going to open up of the dip buyers step in. Else, just expect more selling to drop the market further.
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