The Fuse
Equity futures are again mixed as the SPX 500 tries to make it nine straight wins. Internals are weakening a bit as buyers stall out, that has been the case mostly this week, we’ll see if an end of week surge can jolt the indices higher and get the SPX 500 above 4,400.
Interest Rates are modestly higher but the trend in rates on the long end of the curve remains downward. If that trend continues it will give a nice lift for growth stocks.
Plenty of Fed speakers out yesterday including Jay Powell talking about the economy and inflation. In the political spectrum, a third GOP debate last night with no clear winner. European stocks were higher, gold modestly down and oil ticking up a bit to 75.66 per barrel (wtic). Bitcoin rallied to an 18 month high.
Solid earnings last night from a trio of companies. Disney, Twilio and Hubspot beat and raised guidance into 2024. Affirm Holdings and Duolingo also put up strong numbers.
Another rather quiet day when the bears could have taken control in the short run but there was still buying to be done, and that brought the indices back up from a mediocre afternoon. Stocks finished mixed but the bias remains to the upside.
Breadth again was weak and now this indicator is on a sell signal. Too much of a good thing last week was just too much to overcome. It’s not over though for the bulls, not by a longshot. However, breadth readings need to improve, the oscillators are now well off their recent highs. Sideways action would be ideal.
Sideways movement with poor volume is what the bulls would like to see after that strong week we just completed. It’s going to be hard to resist following the momentum, but once it dries up (any day now) we’ll have a better feel for the next directional move. Price continues to creep up with low turnover and that would be a problem, a lack of conviction by the buyers.
We are still on 4,400 watch, the ES futures flirted with a close above there but failed to close above there. The moving averages are catching up to price, bollinger bands continue to widen and volatility (range) is expanding. The setup is quite good for the bulls here if they don’t fumble the ball, seasonal trends are in their favor. Resistance is going to be difficult, but a couple of closes above 4,400 and it’s game on for the bulls.
The Internals
What’s it mean?
Tough day for both sides as the markets just continue to flounder after that stellar week. The VOLD remains flattish, which is really amazing after the week it just had. TICKS are red and concentrated too, with a huge drop in VIX again and put/calls have risen quietly. The TRIN was elevated yesterday, showing the imbalance between breadth and volume, far more issues lower and not supported by volume, that could be considered a positive for now.
The Dynamite
Economic Data:
- Thursday: Jobless claims, wholesale inventories
- Friday: Michigan sentiment, treasury budget, consumer sentiment
Earnings this week:
- Thursday: BDX, HBI, SONY, TPR, ALRM, TTD, SYNA
- Friday: MGA
Fed Watch:
Quite a few Fed speakers out this week including Chair Powell today. We’ll see if he puts a bit of zest back into the market action or if he follows the same script as last week.
Stocks to Watch
Disney – The House of Mouse will deliver earnings this Wednesday and after a stellar week the setup is there for some disappointment following the release. However, if the stock pulls back it could be a good buying opportunity.
Interest rates – This past week saw a huge drop in rates on the long end of the curve, and the stock market rallied on it. That move down in yield was exaggerated enough, but many still see inflation coming down. We need to see more evidence, else rates will climb right back up.
Seasonal patterns – November is considered on of the best performing months for the stock market over the last 20 years, tied for first.
It is even better than December when Santa Claus is due to arrive. We’ll see how far this seasonality is carried.