The Fuse
Equity futures are a bit soft this morning following a violent up move by markets on Mondays. Interestingly, most Mondays in 2025 have been higher, so it does not pay to be short into the weekend. It’s going to be tough getting three up days in a row especially with few catalysts to drive the markets higher. We are in a seasonally bullish period right now and that should work as a tailwind for stocks.
Interest Rates are slightly lower this morning as bond traders are happy with current prices. High yield is steady, the 10 yr is not moving too much and the fed funds futures now see an 81% chance of a rate cut in two weeks.
Stocks in Europe gained slightly, STOXX ahead by .1% led by Germany and France. In Asia the Nikkei was up about the same amount, Hong Kong up .7% and Shanghai lifted .9%. The dollar index fell .1%, gold is ripping higher as is silver, crude oil down under $59 per barrel. Yields in Germany and the US 10 yr up 1bp.
Earnings last night from Zoom were pretty strong, the company guided their quarter higher. This morning strong numbers and guidance from Alibaba has that stock lifting in the pre-market, later today retailers Kohl’s and Best Buy and Burlington, tonight we’ll hear from Dell, Workday, Nutanix, Autodesk, Ambarella.
Now that’s more like it! Stocks ripped higher on the open and never looked back, the bulls were encouraged by Friday’s action but having fallen late in the day some were concerned this would be a ‘one and done’. After starting off the day at the lows (which was a gap higher) the markets moved upward and carried some strong momentum with it. The Nasdaq had a banner day, more than 2.4% higher on strong turnover. That turns the tables and at least gives the bulls a chance to get to the 20 day moving average, about .7% above current levels.
Breadth started out poor but did finish positive, just not overwhelming for the sort of price action we experienced. That’s okay though, several days of distribution and poor breadth are leaving many to wonder if the correction is over or not. If so, a huge wall of worry will be climbed, in fact to the end of the year. Oscillators are still negative, new lows running ahead of new highs but that might be coming to an end soon.
Following a couple of strong volume days the turnover died down a bit Monday. That’s to be expected following an expiration Friday, the worry of course is the lack of committment by the bulls to sustain the price rise. We won’t see to much expansion of volume to the end of the week.
Maybe that test of the 100 ma was enough to get the bears in line, or perhaps the have bit off more than they could chew. No question the bears had the ball and were ready to run with it the first half of November but maybe that run is over. First up is the 20 ma where the bulls may run out of energy.
The Internals
What’s it mean?
We may have seen the bear raid come to an end for now. The internals have started to turn up and just in time for seasonal trends to play out. Put/calls went sharply lower but need several more days for that to continue before that indicator is bullish. VOLD was solid but not like Friday, ADD the same way. TICKS were super strong, green all day long with the VIX getting smashed. A good but not great day for the bulls according to the internals.
The Dynamite
Economic Data:
- Tuesday:Retail sales, PPI, BIZ inventories, consumer confidence, housing index
- Wednesday:Durable goods, jobless claims
- Thursday:n/a
- Friday:chicago biz barometer
Earnings this week:
- Tuesday:BABA, NIO, ANF, ADI, KSS, BBY, PONY, BURL, DELL, ZS, ADSK, AMBA, WDAY, PD, URBN, NTAP
- Wednesday:DE
- Thursday:N/A
- Friday:CHA
Fed Watch:
We heard from several fed speakers the past couple weeks and John Williams of NY Fed seemed quite influential. The head of this important bank seemed to indicate he was willing to vote for a rate cut at this next meeting even if more data is yet to be seen. That is not too surprising, Williams is seeking the Fed Chair along with some others. There is no doubt some contentious comments will be made during the next meeting, and maybe Chair Powell will be able to stick to a consensus decision.
Stocks to Watch
NVIDIA — After posting very strong earnings and guidance, the big chip company fell back to earth late this week but is now establishing a range. We may not see too much movement here to the end of the year as volatility recedes, but suffice to say big money managers may want back in end of the year.
Crude Oil – Don’t look now but crude is firmly below $60 per barrel and not looking bullish. This week estimates for oil demand were slashed, meaning supplies are too high and that could mean negatives for the economy. Prices down yes, but oil is a key economic indicator.
Name – event, level, your expectation
