The Fuse
Futures are down modestly this morning but well off their overnight lows. At one point, the ES futures dropped to its 200 day moving average overnight (4,235 or so) and bounced hard as yields fell from higher levels. It’s this overnight capitulation that could stoke a rebound or rally over the coming days.
Interest Rates on the 10 yr rose up to near 4.9% and backed off overnight. It could have been a capitulation moment for those long stocks and long bonds.
Political news as House Speaker Kevin McCarthy was ousted from his job in a vote by his colleagues. The fallout is not yet known as this was the first time it ever happened, the government has just over a month to come up with a deal to head off a government closure (Nov 17).
Not much on the earnings front but tomorrow we’ll have Conagra and Constellation Brands.
Fed speakers were out this week and clearly showed a hawkish bias. In fact, fed funds futures now sport a 32% chance of a hike at the next meeting in a month. The jobs data this week is likely to change that probability a bit.
Another rocky session with breadth unwinding yet again. A rout was on from the start, 6-1 negative breadth leads us to believe some chaos is just around the corner.
Volume was quite elevated as you could imagine. Sellers are firing away with all barrels loaded. There is just no interest in stocks as interest rates remain elevated. Even bond volume is extreme, which is not all that common.
Falling through support and staying below it is bad news for the bulls. We can see how close the 200 moving average is and that means another .45% lower on the SPX 500. The Nasdaq 100 fell again below 15K, a level where support had been strong. Yet volume was heavy here. There could be a bounce soon but that is likely to be a spot where more selling will happen.
What’s it mean?
If you thought yesterday was big washout in breadth and volume you were fooling yourself. There is plenty more downside to go by our work as the indicators show plenty of weakness at hand. The VOLD had another miserable session, the VIX climbed above 20% while the ADSPD was a trend down day. Ticks concentrated again in. a sea of red, not a good way to enter a new earnings season. Maybe the jobs report will bring a respite to the selling.
The Dynamite
Economic Data:
- 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:
- 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 speaking on the dais. 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.
