The Fuse
Equity futures are up modestly as traders look to expand into higher ground today. Next up target for the SPX 500 would be 6,800, there is a bit of support at 6,650 if the bulls decide to back off a bit. With so much momentum in this market right now and money chasing every group it is stunning to watch. Chair Powell and other fed speakers out today, we’ll see if there is some influence.
Interest Rates are down a bit this morning as bond buyers are back. We still can’t seem to crack the 10 yr range of 4.1-4.2, perhaps with some economic news we will have our answer. Without much data to lean on fed futures have backed away slightly from an ‘assured’ cut in October, only slightly. Perhaps the committee waits a bit longer to see the data. High yield remains very tight and well-bid.
Stocks are starting to rally up this am after a mildly volatile overnight session. STOXX was down slightly, German and France though were higher by .4% and .3% respectively. In Asia Japan and Shanghai were up more than 1% each, Hong Kong down a fraction. Gold is backing away from all time highs, silver just off $49, the dollar rose .1% and crude oil is down slightly. Yields on German bunds and US 10 yr treasuries up 1bp.
Pepsi earnings out this morning with a beat on revenue a slight beat on earnings. They named a Walmart exec as the new CFO and announced a new look for Lay’s brand. Delta also reported good earnings and boosted guidance.
A very strong and powerful rally Wednesday had everyone into the pool. Stocks across the board were rallying, a good breadth day with many sectors gaining on the session. We have not had that sort of day in awhile, but also led by the Mag 7 names, NVIDIA being the leader and is now at all time highs. With no news to work on from an economic standpoint (due to the shutdown) we had the minutes from the last meeting and a few fed speakers talking up the economy.
Good not great breadth as this indicator remains on a sell signal, but could flip at any moment. That has been the characteristic of breadth lately, nothing too strong but trudging along, and then a body slam with very weak breadth. Oscillators are still split, we are now in a seasonally bullish period and the market is very forgiving. New highs trouncing new lows.
Very good turnover, nothing great but that’s okay. We don’t need to have continuous accumulation days for this rally to continue, in fact climbing that wall of worry is probably the best chance for bulls to get higher prices. We note the volume breadth has been pretty good since the summer but has backed off a bit, but when it hit new highs the indices followed soon thereafter.
A grinding rally continues on as the bulls retain control. New highs across all indices yesterday with strength in many groups. At this point until we get to another overbought reading we may not have the pullback we need. Certainly if we get to some silly or too giddy point that is likely to happen. For now, it is best to keep reducing risk and find the best trading opportunities.
The Internals
What’s it mean?
Internals were a bit flimsy yesterday. Yes, the VOLD finished at its highs and that was positive, but the ADD and ADSPD were not that impressive, TICKS were mostly green and that was bullish, the VIX also a down session. We’ll chalk it up as a win for the bulls with the internals, but not that impressed.
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.
