The Fuse
Equity futures are getting roughed up this morning after rallying at the open last evening. Rates continue to climb and are putting lid on stocks.
Interest Rates are again on the move upward, not good for growth companies. It appears 5% on the 10 year yields is the next likely scenario, and above there could be big trouble.
It’s the first trading day of the month and even though the government did not shut down this weekend, stocks are still licking their wound’s from a very poor month of September and third quarter.
Earnings calendar is light this week as the market prepares for the start of earnings season next week.
Not many events this week but the economic data to come will be important. Manufacturing data, factory orders and jobs data all week long.
Breadth was down once again last week with a huge stumble on that Friday reversal. This indicator remains on a sell signal, oscillators are not oversold here but could be with another leg down.
Volume was pretty heavy and to the downside mostly on Friday. Chalk up another day of distribution, with more new lows versus new highs. This is a huge red flag warning.
The obvious level of support comes in lower at the 200 day moving average for the SPX 500, it’s right at 4,200. That would be a place we might see a bounce but it would also create a lower high, lower low on the chart. That is the textbook definition of a downtrend.
The Internals
What’s it mean?
Plenty not to like on Friday as a potential rally was snuffed out with higher interest rates. Notice the weakness in the VOLD and ADD while volatility remains well-bid. Ticks were concentrated red as well all session long, market distribution is at hand. Could it turn this week? Sure, but let’s not guess it.
The Dynamite
Economic Data:
- Monday: S&P PMI, ISM, construction spending
- Tuesday: JOLTS report
- Wednesday: ADP employment, PMI services final, ISM non-manufacturing, factory orders
- Thursday: jobless claims
- Friday:NFP for September, consumer credit, vehicle sales
Earnings this week:
- Monday:n/a
- Tuesday: MKC, CALM
- Wednesday: HELE, RGP
- Thursday: CAG, STZ, LW, LEVI
- Friday:
Fed Watch:
A huge week for fed speakers. No less than thirteen speeches/appearances this week, mostly talking about the same stuff. Even Chair Powell is out later today. We don’t expect much different than an array of opinions, but mostly hawkish.
Issues/Stocks to Watch this Week
Interest Rates – Rates continue to rise as we see inflation just not going away. The Fed is likely now to raise rates in November after Congress avoided a shutdown.
Crude Oil – The strength in crude has been impressive, but the high $100 mark will be strong resistance. However, hanging out above $90 would be very bullish for this market.
SPX 500 – As mentioned above, there is good support at the 4,200 level. We could see a strong test down there but that would break last week’s lows and create a very oversold condition, an a nice bounce opportunity.
