The Fuse
Equity futures are bouncing back this morning after a day of selling Tuesday. The market structure is tipping right now, but it won’t take more than a few strong days of bullishness to get the ship righted. A wobbly market makes players worried and nervous, just the thing to put the wall of worry up again.
Interest Rates are dropping this morning as we see a nice bid for bonds, high yield is also seeing bullish action, too. Fed funds futures still see a chance of two cuts in 2025.
Stocks are edging higher, STOXX in Europe higher paced by gains in Germany. FTSE also higher by .5%, Crude oil is rallying as is gold, well above 4K per ounce and silver is closing in on all-time highs at $50.
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.
Tuesday’s session was indicative of what could be coming very soon, a strong start followed by weakness and some heavy selling. There is no reason to believe this market is going to falter badly, however there needs to be some sort of pullback to reset the market, else the speculators will just drive up stocks and when they stop buying – you’ll be left holding the bag..
Another session of poor breadth now locks this indicator into a sell signal. This breadth has been swinging back n’ forth for weeks, but now it appears a solid sell signal is now in place. We just have not had consistent up issues vs down and volume trend have not been consistent. Oscillators are back in the red, new highs still dominate new lows but that spread is getting smaller.
After six up sessions in a row we could be looking at a very fast and deep corrective period. We’re talking maybe 2-3%, because once earnings season gets started next Tuesday don’t expect for traders to step in front of this freight train. Bulls often have their way during earnings and this next month should be no exception.
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?
We could have predicted a miserable day from the start as the internals were weak at the opening bell and just worsened. The VOLD hit highs of the day on the open and fell all session, same for the ADD. Volatility started rising again, the VIX pushed higher as did the put/call, something we haven’t seen in awhile. Notable. Ticks were mostly red, several sell programs hit hard.
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.
