The Fuse
Equity futures are quiet on this Friday morning as stock traders await the first big week of earnings. So far this week the Nasdaq has taken the lead while the other indices digest recent gains. VIX is down, that means we may see very little back/forth movement today.
Seeing a modest tick lower in yields as some bond buyers catch some bargains. High yield has pulled back some as spreads widen slightly, some uncertainty about the shutdown and the effect on the economy. Fed futures still see a cut coming later this month and likely one more in December before the committee takes a breather.
Stocks in Europe were flat, but France and Germany showed some modest gains, FTSE was also flat, as was the US dollar index. Gold is higher, back up 1% while silver is also catching a nice bid. Crude is down and threatening to break $60. Stocks in Japan were down 1%, Hong Kong off 1.7% and Shanghai down .9%. Yields are down, German 10 yr bunds off 1bp, 10 yr US treasuries down 2bps.
Earnings are slight this week, we’ll have much more to come starting Monday.
A bit of giveback on Thursday as bulls got a bit tired from the incessant buying earlier in the week. That’s fine, you can’t go up everyday forever. Fedspeak was rampant this week, Chair Powell did not say anything earth-shattering. The minutes on Wednesday revealed most Fed voters are looking to be more aggressive in bringing down rates, even if there is a lack of data due to the government shutdown.
Breadth was very poor yesterday and that keeps this indicator on a sell signal. New highs are still pushing against new lows, this indicator on a buy. Oscillators are back into bearish territory, but are now negative and could lead to some more downside if it continues. Cumulative volume breadth remains strong.
Moderate volume on the SPY and IWM but the Nasdaq and Industrials notched a distribution day – slightly. That’s not a tragedy, given the fact there have been so many accumulation days of late. That seems to be the theme, but we would like to see a few up days with stronger turnover, at the very least.
A slight pullback to some short term support yesterday. That has been the situation on drawdowns lately, short in terms of duration or price. A modest give back on lower turnover is often the right antidote for the dip buyers to step in and pick up the market.
The Internals
What’s it mean?
Another day of poor internals, and this time the market responded. A negative day all around, VOLD still weak as is the ADD. Lots of red on the TICKS, so many sell programs hitting all day long. VIX rose up early but melted end of day, PUT/CALLS lower as this indicator remains on a buy signal. Fridays have been mixed lately, we’ll see if the bulls can muster up a rally.
The Dynamite
Economic Data:
- Friday:Consumer sentiment, monthly budget, Austan Goolsbee
Earnings this week:
- Friday:N/A
Fed Watch:
With the government shutdown still in place there are not many reports that can be released for analysis. But fed speakers are going to out in droves this week talking about fed policy, the economy, inflation and other topics. Pay attention to what Chair Powell has to say on Thursday.
Stocks to Watch
Bitcoin – The big crypto has been making a move recently and bringing other names up along with it. Some have been predicting a nice rally for Bitcoin into the end of the year, technically it does look ready to rip higher.
Gold – Hitting new highs last week in a stunning move up through 3,900 – we are watching for the 4K number to fall, eventually it gets there.
Volatility – The VIX remains low and that means stocks can rally but the market is very complacent here. That eventually gets paid back with some bearish action, it’s just not happening now. We enter a seasonally strong bullish period so the VIX may be going to sleep for awhile.
