The Fuse
Equity futures are mixed with the ES futures up modestly but the Dow futures down a fraction. Not much news on the economic data front but some Fed speakers out with some speeches later in the day. With yesterdays’s modest gains in the stock market we would be looking for some followthrough and perhaps a move above yesterday’s highs by the end of the week. Mildly volatile move over night, erratic price movements as a result of poor liquidity.
Interest Rates are modestly lower this morning but no news to drive bonds higher. This may simply be re-positioning and rebalancing portfolios. Rates on the long end may soon be a concern if there is an adverse decision by the Supreme Court on tariffs (declaring illegal, need to sell more debt to raise $$$). The 2 yr yield has stopped rising as well, fed funds are steady and seeing a 2-1 chance of a rate cut in December.
It’s a mixed picture for stocks as volatility has been sucked out of the market. We are looking for stocks to rally again for a followthrough day. In Europe the STOXX was down .2% led down by sharper declines in France and Germany. Japan was up nicely, over 1.3% and likewise Hong Kong and Shanghai better than 1% on good volume. Gold is higher and back above 4K, silver up 1% as is crude oil, the dollar fell .1%. German and US treasury yields fell 1 and 2bps respectively.
Earnings from some big names last night, strong numbers from ARM and better guidance, also solid earnings from Qualcomm and a boost to guidance, the stock is down modestly. DoorDash and ELF are getting smashed after missing expectations, Applovin and Dutch Bros gaining a bit of ground. This morning We have DataDog, Vistra and tonight DraftKings.
The bulls came back but it wasn’t clear enough to see if there will be followthrough. That’s the worry of course, that Wednesday is just a one-off the selling continues. That would be an awful situation for the bulls and really jeopardize the uptrend. Volatility fell but it was down much more during the day, that tells us put buyers were still active. Though the session was good, there was some heavy selling late in the day that had many looking a bit skeptical. Wall of worry being built? Just might be..
Breadth was positive yesterday but that is the only good thing to say about it. The bulls would like to string together a few more of these positive sessions, sprinkling in a bear rout or two. As it is, breadth is still on a sell signal, and oscillators remain negative but if we can finish with A/D positive the remainder of the week these may flip green. Seasonal trends are likely to take hold soon.
IWM and DIA posted better volume days and actually printed a morningstar pattern, which is technically bullish. Of course, we always like to see followthrough when these patterns emerge, and that would be today. If that happens perhaps the bullish trend is back on track. We saw a bit of distribution recently from the big names in tech, that level of volume still has not come back to those names after reporting earnings (think Mag 7). Perhaps a bit of time will help the big money get back into the game here.
Tuesday was a good test to near the 6750 level which we hold as strong support, the futures market early Wed morning tripped down to that level as well on some pretty heavy volume but the indices snapped back sharply. It was a good day and the testing of the 20 ma may be all that we get here. If the bulls can regain some composure and run stocks higher then the chase will be on.
The Internals
What’s it mean?
Though the indices did not finish on their highs of the day it was certainly a strong day for the internals. VOLD and ADD were up solid even though a late day selloff took the ADD down. VIX was down most of the day but curled up at the end, while ticks were hugely green all session long, buy programs hitting hard. Put/calls slowed down a bit, fewer buyers of index puts on this day.
The Dynamite
Economic Data:
- Thursday:5 fed speakers, maybe some economic data
- Friday:Potential for jobs report, consumer credit, sentiment, fedspeak
Earnings this week:
- Thursday:COP, BCE, OSCR, VST, AZN, DDOG, ASPN, SBD, MRNA, TTD, OPEN, MP, IREN, SOUN, DKNG, INOD, ABNB
- Friday:CEG, WEN, FLR, SIX, BAM, DUK, HLLY
Fed Watch:
Last week’s Fed meeting was quite interesting. There were two dissents among the voters, one wanted no rate cut, another wanted 50bps. The committee gave the market what it wanted but Chair Powell refused to yield to market pressure for a December cut, instead saying it was ‘not a done deal’. That send the fed futures tanking and the market did as well, but it certainly came roaring back. It appears the markets are accepting the path of rates, whether fast or slow.
Stocks to Watch
Gold and Silver – Precious metals continue to do well with markets also strong. They could continue much higher into year end, and with strong momentum why not?
Bitcoin – With two months left in the year the shining alt coin could be poised to make a big move to end the year in style, at new highs. This week may start the process.
Earnings – Very strong earnings reports this quarter and this week will be the biggest one yet, more companies delivering that last week. We’ll get a good read on market valuations after this week is over.
