The Fuse
Equity futures are slightly lower this morning after a volatile overnight session. Stocks appear to be calm here but there is some trouble brewing under the surface. Keep dancing while the music is going but be ready to sit when it stops.
Interest Rates are flat this morning as yields remain firm. Bonds seem to be priced right here, waiting for some news to hit before responding. 2 year yields are flat, fed futures still seeing two more cuts in rates this year.
Tbe STOXX in Europe was mostly flat today, FTSE picked up .1%. Both German bund yields and US 10 yr treasury yields gained 1bp, gold and silver are mixed, the dollar rose again up .2% while crude oil is flat. Japan was flat overnight, China exchanges closed.
Technically earnings season starts this week and we’ll hear from Delta, Pepsi and Levi’s, but we won’t really start getting a good read until the banks/financials step into the confessional the following week.
Strong session for the bulls but again the internals were lagging behind (more below). Given the fact seasonal trends are bullish the market seems to be given the benefit of the doubt. With low volatility and no real need to do any selling the bulls are in charge. The problem there is we don’t have much room for error, and if good earnings are already priced in then we are looking at selling on the news.
Back to poor breadth readings as the market remains unstable with good price action but very poor internals are going to be a sign of eventual weakness. We’re not calling for it now but at some point it will matter. Oscillators are mixed again, new highs still performing well vs new lows.
Even with some positive news from technology (AMD) that was not enough to drive volume higher. In fact, the lower turnover is a warning sign, the bulls lack conviction. There is little to dispute when buyers are not stepping up with volume the air is thin and a pullback is imminent.
A good chance to see a pullback at some point this week, though not guaranteed. Not that there needs to be one but a moderately overbought market needs to come in at some point. Six up sessions in a row places the odds at very low of continuation. A pullback to at least the 10 ma and hold would tell us how strong this rally has become.
The Internals
What’s it mean?
Internals were weak as they continue to wreak havoc on the market. Price action is great but under the hood there are problems. VOLD was up early and fell hard, ADD down all session long while VIX also spiked lower. Ticks were green early but some heavy sell programs hit and turned them red. Might be a down session today.
The Dynamite
Economic Data:
- Tuesday:trade deficit, consumer credit, lots of fedspeak
- Wednesday:More fedspeak
- Thursday:Powell speech, jobless claims, inventories, fedspeak
- Friday:Consumer sentiment, monthly budget, Austan Goolsbee
Earnings this week:
- Tuesday:MKC, PENG, SAR
- Wednesday:AZZ, BSET, RGP
- Thursday:DAL, TLRY, PEP, HELE, LEVI
- 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.
