The Fuse
A common theme this week with futures rallying before the open. More positive action and followthrough means more investors/traders will be coming on board. As long as the giddiness does not get out of hand the wall of worry is up and traders will slowly start getting involved. Further, dip buyers are waiting for their chance.
Could there be a bigger rate cut than expected next week? Certainly that idea will be in the conversation next week. The trend in rates has been down since early August, and if that continues then more pressure on the Fed to craft a more aggressive monetary policy. The 2 yr is constructive in helping us predict where that policy is at, currently under 3.6%. 10 yr US treasuries are strong as well.
Stocks continue to rally across the pond with the STOXX in Europe up a modest .2%, led by better moves in France. FTSE was up better, gains of .5% as the US dollar index climbed nicely, up 1.2%. Gold is down nearly 1%, silver off a bit and crude oil down more than 1%. Stocks in Asia were mixed, Japan up 1.2% and Shanghai a robust gain of 1.7%, Hong Kong down slightly. German 10 yr bund yields and US 10 yr treasury yields both up 1bp.
Earnings last night were slow but in the am Chewy came out and had another awful report. This morning we hear from Kroger, Vera Bradley and Lovesac while tonight it is a big one from Adobe and then Farmer Brothers.
Markets were mixed most of the day as the buying that occurred early on dissipated quickly. There was really no followthrough here even after the better than expected PPI number, but given the fact rallies have happened here most of the week there would no surprise if the bulls take a break the remainder of the week.
Breadth was not overwhelmingly positive Wednesday, in fact it was dead even. That tells us plenty about sentiment and attitude. There is an apathetic belief on markets here, perhaps a better chance to buy later as the market takes a dip. Oscillators are still hovering near the breakeven point, while new highs just slammed new lows.
Volume trends are starting to pick up and that will continue into next week, with a fed meeting and a huge triple expiration week on the 19th. We like to see good volumne on up days but it is nto a requirement not fatal for the trend if it does not happen.
If the bears can wrest control here they might seize on the opportunity, but they have mostly been limp. Who knows, if the CPI comes in strong today there could be a lower level to work towards.
The Internals
What’s it mean?
The bears may be smelling an opportunity. No question the bulls had the ‘right of way’ after the Oracle earnings blowout. Notice the weak VOLD and the ADD, which made its high on the open and fell throughout the session. That is bearish, while TICKS were mostly red, that indicates sell programs all day long. VIX even shot higher and closed in the green. Again, an opportunity — but will it be squashed?
The Dynamite
Economic Data:
- Thursday:CPI, jobless claims, US budget
- Friday:Consumer sentiment
Earnings this week:
- Thursday:KR, LOVE, VRA, HOFT, ADBE, FARM, KMTA
- Friday:
Fed Watch:
We heard plenty from the Fed last week and will have nothing this coming week as the committee is in a ‘quiet period’ before the next meeting. That could be raucous, with both doves and hawks digging their heels in to support policy measures. Will it be one, two or no cuts?
Stocks to Watch
Bonds – Once again, we’ll be watching bonds here, especially yields and if they move sharply higher following CPI and PPI. That might only happen if a hot number comes.
Gold – Some big central banks have been buying gold hand over fist, and that has pushed the metal to all-time highs. Gold and silver are outperforming markets in a huge way this year and that may continue.
Technology Stocks – Some were hot early in the week like Google, but NVIDIA fell sharply even as Broadcom rose up to new all-time highs. Semiconductor stocks have not responded well to President Trump’s rhetoric.
