The Fuse
Equity futures are staggering to find some direction this morning after Monday’s large pop. Stocks were mostly higher across the board and closed near highs of the session, though it was far from a rout. Volatility lightened up considerably and now we find the VIX heading down, under 20% as of this morning.
We may see more drop over the next couple of sessions if the CPI and PPI reports are taken friendly.
Interest Rates are down modestly this morning as bondholders choose to lock in rates. We still see evidence of an aggressive fed funds futures market looking for 4+ rate cuts in 2024, far more than the Fed is willing to do at this point. Will this week’s inflation data make a difference? Probably not, as the Fed’s attention has turned to the employment part of their dual mandate.
Across the pond stocks in Europe were mostly flat as was the US dollar. Gold is up modestly while crude oil is backing off about 1%. The German 10 yr bund climbed by 2 bps, stocks in Asia were mixed as the Japan Nikkei was down slightly but Shanghai and Hong Kong both rallied small. Tonight’s Presidential debate will be watched carefully for any words that could influence markets.
Earnings from Oracle were lights out, strong and with very solid guidance. The stock is up nearly 8% on good volume in the pre-market. Rubrik also reported a beat but is down about 10%.
Apple’s event came with a bit of ho hum, or did it? The initial response was not enthusiastic, probably because it was leaked about the new iPhone and characteristics. The company has some exciting new features to come and the installed base is ready for something new. The watch is also refreshed with new features. While the stock did not respond yesterday it simply means the bigger move is out into the future.
Outstanding breadth yesterday all session long, the bulls were out in force buying the market up after some encouraging news overseas. Europe was higher and spilled over to the US futures market, a solid move higher with the advancers winning by nearly 2-1. We often see more of a rout on a day where the indices are up more than 1%, but the bulls will take it. Oscillators started moving higher again but are still in negative territory.
Volume levels were lower than Friday which makes this Monday rally a bit suspect. Could buyers have been front-loading their buys before the inflation reports? That’s a probability, but for now we’ll just say volume is average but will pick up later in the week and of course next week with a huge option expiration and Fed meeting.
We still have extreme resistance at the very stiff 5,500 level on the SPX 500, but one more strong day will push through that mark, and perhaps some daylight ahead. Markets swooned after a strong start to the day but managed to make a nice run towards the highs of the session. Russell 2K (IWM) has good support at 205, Nasdaq strong support at 18,400 (Friday’s lows), the SPX 500 seems to be in the best position for a move upward.
The Internals
What’s it mean?
A solid day for the bulls all around as we see very impressive internals. The VOLD led the charge higher, finishing up and at the highs of the session. The ADD pulled down late as did the ADSPD, but no matter it was still strong bullish statistics. The TICKS were bright green all session long, with some good action the entire session. Certainly the bulls were inspired by a weak VIX, which tumbled more than 10% on the day. That’s big move and with followthrough is huge for the bullish case.
The Dynamite
Economic Data:
- Tuesday:NFIB Optimism Index
- Wednesday:CPI
- Thursday:Jobless claims, PPI, federal budget
- Friday:Import prices, consumer sentiment
Earnings this week:
- Tuesday:ASO, CMA,PLAY,GME, WOOF
- Wednesday:VRA, OXM
- Thursday:BIG, KR, SIG, ADBE, RH/span>
- Friday:N/A
Fed Watch:
No fedspeak this week, the committee is in their quiet period before next week’s crucial meeting. The data this past week still shows the economy is chugging along at a moderate pace, though some metrics in the labor report see chinks in the armor. A few fed speakers during the week stated the committee is ready to commence with a rate cutting policy which in our view will last quite awhile as the FOMC looks to reduce the tight conditions that have existed for a couple of years.
Stocks to Watch
Apple – A big event is scheduled for this week, but recent weakness in the stock means there has been little excitement to buy Apple. Can that sentiment turn around or will this new iPhone introduction (likely) be another excuse to do more selling.
Inflation – In Jackson Hole we heard Chair Powell declare the time had come for rate cuts to start. That of course could start next week, but there are still important inflation reports to consider this week. Will the CPI confirm the Fed’s view that inflation is right near target?
Nasdaq – It was the worst week in a year for stocks, the Nasdaq took the brunt of the punishment. Can it recover or will we see another lower higher, lower low in the weekly chart? The 50 week moving average is not far down from here, about 800 points which can be tagged easily with elevated volatility (currently).
