The Fuse
Equity futures are up modestly as the bulls look for some followthrough. The last two sessions have seen a nearly 4-5% moves across the board, an astounding number is such a short period of time. The pent up demand was unleashed yesterday while the bloated VIX was dismantled. That could continue today after the Fed meeting has concluded.
Interest Rates are higher again this morning as the ‘Trump trade’ takes full effect. That would include higher rates, higher dollar and relief the election produced a clear winner. The 2 year has been climbing as well, up nearly 80bps since the last Fed meeting which was a 50bps cut. It is widely expect the committee will cut 25bps to relieve the stress of tighter monetary conditions, which are no longer needed as inflation is coming down.
In Europe stocks were modestly higher, by about .2%, the indices across the pond were up about the same. gold is about flat, crude oil down about 1% while the dollar has given back some gains. German 10 yr bund yields are higher by 3 bps, US treasury yields down slightly. Stocks in Asia were mixed, in Japan the Nikkei was off by .3% but huge gains in Hong Kong (2%) and Shanghai, up 2.6%. We’ll see if there is followthroug here.
Earnings last night from Applovin were outstanding along with guidance, that stock is moving higher. ARM Holdings beat but slightly took down its guidance, perhaps a little profit taking there. Qualcomm is ripping higher today, Mercado Libre is pounded while Moderna had a nice upside surprise. Hershey missed this morning while DataDog beat and raised guidance. Tonight we’ll hear from Block, DraftKings, Arista Networks, The Trade Desk, Fortinet, AirBnB and Pinterest.
What a follow-up day! Stocks soared higher from the open and never looked back, leaving a massive gap in the chart (that will eventually be filled). The reason for the huge move was the election was over and investors liked who won. The price action was telling, a monumental move for the indices that took the Nasdaq and SPX 500 up to all-time high territory. Lo and behold a new all-time high for the Russell 2K, which advanced some 5% on the day. Simply stunning.
You would think the breadth would have been lights out fantastic on a day like this, but that would be wrong. Not even 2-1 in favor of the bulls, stocks were treading water a good part of the day, apparently the lower volatility acted more as a pull rather than a push. Nonetheless, this indicator is back in bull mode. Both oscillators are positive again, new highs ripped vs new lows, that is on a bullish signal.
Monster volume prints at the end of the day on the indices, especially the small cap Russell 2K. The IWM printed a huge bar in price but also in volume, biggest in a few months. This level of volume is likely to take this ETF towards the 250 level very soon, and perhaps by end of the week. Other indices had impressive volume as well, which means short covering and natural buyers are actively adding positions (or closing out shorts).
Support levels were not tested yesterday, of course the lows of the day were opening gaps. But certainly some levels will serve as good reference points. For the SPX 500 that would be 5,870, the old high. A couple of closes above would confirm that, while the Russell 2K has good support at 225, but with little resistance ahead the moving averages will soon be catching up.
The Internals
What’s it mean?
Incredible move up by the markets was fully confirmed by the internals, or most of them. What drove the markets higher? Clearly volume, see the VOLD and the TICKS, which indicate heavy buy programs hitting. But the ADD and ADSPD were not very ‘loud’, the vix came in quite a bit though. Put/calls were down sharply, that tells us put buyers were absent. A followthrough day would be meaningful.
The Dynamite
Economic Data:
- Wednesday:SPX final US services PMI
- Thursday:Jobless claims, productivity, FOMC rate decision, consumer credit, inventories
- Friday:Consumer sentiment
Earnings this week:
- Wednesday:CELH, CVX, TEVA, TM, JCI, ARM, AMC, QCOM, ELF, APP, IONQ, CLOV
- Thursday:VSTR, GOLD, DDOG, HAL, HSY, MRNA, DKNG, ANET, SQ, RIVN, U, TTD, AFRM, FNET, PINS, ABNB
- Friday:SONY, IEP, FLR, NRG
Fed Watch:
Another Fed meeting is upon us and the Fed futures market predicts a cut after Thursday’s meeting. That is likely the case as the committee has no reason to disappoint the crowd, but debate about a December cut will certainly be heard. The job report Friday (poor) may be an anomaly, but if it is slowing that quickly a faster rate cut policy may be appropriate.
Stocks to Watch
Election – We have finally come to the day that can change the US. We should know how things turn out later in the week, the effects on the market and economy will be analyzed.
Federal Reserve – The seventh meeting of 2024 will take place this week, the committee is largely expected to cut rates once more, this time by .25%. That may not sound like much but with lower inflation it makes sense for the committee to bring down borrowing costs.
Earnings – It is another big week of earnings as the season comes into the halfway point. 1/3 of the SPX 500 reported last week and very little damage was felt. Many stocks reporting this week have strong chart patterns and formations, we’ll see if that continues to be the case.
