The Fuse
Futures are flattening out and mixed early this morning but once again all the action was overnight, where we saw a deep plunge again to the futures but a sharp rally back as volatility drifted lower. Perhaps the elevated volatility over the last week is being sold in front of the news (jobs data).
Interest Rates are modestly higher after dropping nicely lower on Wednesday. The inversion of the yield curve is much smaller now than at the start of the year, thanks to a large run higher in the long end of the yield curve. If long rates stay positioned higher for longer like the Fed Funds rate that will be problematic. Further, bond yield rises threaten the soft landing scenario.
Political wranglings continue after the removal of Speaker McCarthy. Oil fell sharply yesterday and continues its decline today. Economic data was mixed with a weaker ADP number and slightly in line manufacturing data.
Very few earnings, but Helen of Troy (HELE) posted a weaker number, this morning we had Constellation Brands beat but offered weak guidance going forward.
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.
A strong day for the bulls with good volume, price action and technology leading the way. If there is some more upside through the jobs report then earnings season might be something to scream about. Breadth improved a bit but it was not screaming ‘bull market’.
Turnover was lower than the prior day so this was not considered an accumulation day. We may see one later in the week if buyers step in following the news releases.
Overnight saw the ES futures tag its 200 day moving average and bounce, yields rose up and fell sharply. Is that it for this bear move? Way too early to tell, but certainly an up session was a relief. 4,300 remains strong resistance, a move to the 20 day moving average would be logical here.
What’s it mean?
Finally a day the bulls can say ‘whew’! From the start, markets were in their favor as volatility was low and sank all day long. That’s not to mean the bulls are safe here, but one day of relief is a good beginning. The internals were mixed – fair to strong, with high put/call ratio (bearish) and only moderately better VOLD and ADD. A couple more up sessions would put some distance away from the bears, but Tuesday’s action was damaging to the trend.
The Dynamite
Economic Data:
- Thursday: jobless claims
- Friday:NFP for September, consumer credit, vehicle sales
Earnings this week:
- 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.
