The Fuse
Equity futures are ripping higher this morning as the bulls look to continue the market rally from last week. With a short trading week (Thursday markets are closed, Friday is a half session) volatility could drop sharply.
Interest Rates are falling sharply as bond buyers step back in and pick up some fixed income at higher yields. The selling recently in bonds has been problematic lately, but if rates do come down we are looking for better equity pricing, especially in small cap stocks. The IWM seems to be moving towards new all time highs.
Strong move over night as the equity futures opened up sharply higher following the weekend. Stocks in Europe were up .5% paced by positive action in France and Germany, the dollar fell .1%. Crude is barely lower, gold is down about 1% as is silver. Bitcoin is again making a run to 100K. The German 10 yr bund yield dropped by 3bps, treasury yields in the US fell by more, 7 bps as bond buyers pick up some bargains. Stocks in Asia were mixed, Japan up sharply, over o13%, but Hong Kong and Shanghai both declined modestly.
Earnings this week are shrinking but some important names will be reporting this week, including Dell, Workday, Crowdstrike, HP, Ambarella, BestBuy, Dicks, Abercrombie and Zoom.
Pretty strong market move supported by positive indicators and explosive internals (see below). As we have a short trading week we understand the role of volatility, which is likely to be sold. Why is that? Simply put, the option seller has the advantage with decay being a big factor. over the next 7 days there will be 3 1/2 days of option decay rather than the normal 2, so selling option premium that is slightly elevated is a smart move. Friday is also the last trading day of November.
Very strong breadth on the day as the bulls carried the moment, better than 4-1 on the positive side for breadth that improved this indicator.
We like to see a followthrough day of course, and that would be today or tomorrow. Do the bulls have enough firepower left to keep this going and eventually get the SPX 500 back to 6K? Oscillators are now firmly in positive territory.
For a Friday, volume prints were pretty good but far less than Thursday, and that’s quite okay for the bulls’ cause. We cannot expect to see huge volume prints each day, eventually investors run out money to buy stocks until a new stream comes in. As it is, Thursday’s nice surge on better turnover will stand as a good marker going forward.
Support levels tested earlier this week were confirmed, and now with the indices a bit stretched we could see a bit of sideways action after the holiday. Moving averages are running up, the 20 day is once again separated from the price and needs to play catch up. One thing is for sure, short term momentum is very good here and really is dictating the movement of the markets. Every pullback, being in pre-market or real time hours is being bought quickly.
The Internals
What’s it mean?
Strong internals on Friday, really solid VOLD and that ADD finally turned up and stayed up! Ticks were mostly green, a large amount of buy programs during the day while VIX was slammed, down about 10%. That often happens in front of a holiday (this week), put/calls were also much lower. Bodes well for a continuation move and to the 6K level again on the SPX 500.
The Dynamite
Economic Data:
- Monday:N/A
- Tuesday:Consumer confidence, noew home sales, Fed meeting minutes
- Wednesday:Jobless claims, durable goods, GDP first revision, Income/spending, PCE,
- Thursday:N/A
- Friday:N/A
Earnings this week:
- Monday:ZM,WWD, LESL
- Tuesday:KSS, BY, ANF, M, DKS, BURL, ADI, MANU, DELL, WDAY, CRWD, AMBA, HPQ, URBN, NTNX
- Wednesday:GOGL, ARBE, CLGN
- Thursday:N/A
- Friday:FRO
Fed Watch:
No Fed speakers this week though the prior week had a slew of them, they seemed to be sounding the same cautious tone. Waiting on the data as usual. Tuesday we’ll get the meeting minutes and that will give us a clue as to how the discussion went on the last rate cut meeting.
Stocks to Watch
Volatility – We often see volatility fall off a cliff in front of a holiday. Friday 11/22 saw the vix drop 10%, there could be more down in volatility into Thursday.
Small Caps – These were the star performers last week, just a shade off all-time highs. If rates decline we’ll see this group posting even better numbers, driving positive breadth and pacing the rest of the market.
Bitcoin – Nearly tagging 100K Friday was a tease. We are likely to see much higher prices down the road, crypto currency is very strong and moving at a rapid pace. The gold rush is on!
