The Fuse
Stocks are rallying modestly on this Thanksgiving eve. It’s been a strong few days for markets, the indices are within earshot again of all-time highs. The indicators have mostly turned bullish for the short term, however I would consider today key for followthrough above the 20 day ma.
Interest Rates are moving slightly higher this morning as some bond holders take a few profits. High yield spreads remain tight, the 10 yr dipped below 4% for a moment yesterday and may continue that move. Fed futures now predicting an 82% chance of a cut in two weeks.
Stocks are higher this morning and led higher by Europe, the STOXX up .4% led by nice gains in France and Germany. Asia stocks were mixed, Japan up strong by 1.8% but Shanghai down .2% but Hong Kong up slightly. Gold is higher and back above 4,200 per ounce, silver ripping higher and crude down fractionally. US 10 yr treasury yields up 2bps.
Earnings from Dell were terrific, the stock moving higher in the pre-market. On the downside we have Workday, Nutanix, HP and Zscaler, though the latter seems to be overdone here. Urban Outfitters is ripping higher on better guidance, NetApp also strong earnings. This morning Deere beat on sales but missed on the bottom line.
A solid session with some anxious breaths during the early part of the day as the indices swooned lower but marched right back up to close near highs of they . Hello to small caps! The IWM was the leader by far, rallying more than 2% on heavy turnover as it seems the potential for lower interest rates is becoming very real. Nasdaq, for its part also rallied sharply on strong volume trends, we should note this index re-captured the 50 ma, that is clearly bullish.
Breadth pushed higher again thanks to those small cap stocks, a big surge in volume there served as a tailwind for the rest of the market. Oscillators have now turned positive, a very bullish development while new highs are starting again to beat new lows, though this indicator is not yet on a buy signal. It’ll take a couple of days of 100 new highs to get there, we are close. Ticks were super strong again, the bias towards buy programs all session long.
Volume is still below normal levels as we expected to see this week but the indices did post an accumulation day, save for the SPX 500. That is still very bullish even if the level of turnover is lower. Accumulation is important especially when they come on a followthrough day like Tuesday. Look for lower volume reads the rest of the week but don’t be surprised with some big buy programs coming out before the end of the month.
50 day moving average was tested and we had a few closes over it, now a confirmation day would be ideal, then a run to the 20 day moving average before we see in the indices stalling out. That would not kill this rally, but certainly would be cause for pause. So far quite a bit of upside action which is positive for the tape, but if we are in a range then look for a bit of downside to come during the first part of the new month.
The Internals
What’s it mean?
That was some solid improvement in the internals. Strong volume trends, sold VOLD and ADD, which finished at the highs of the day, a rare feat. ADSPD nearly a trend up day, put/calls lower and the VIX getting smashed. Ticks were solid green, a slew of buy programs all day long. Nothing wrong here, the bulls have the keys to the car, let’s see if they can drive.
The Dynamite
Economic Data:
- Wednesday:Durable goods, jobless claims
- Thursday:n/a
- Friday:chicago biz barometer
Earnings this week:
- 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
