The Fuse
Equity futures are down today as the hangover effect from Friday’s expiration is continuing. This has been an historically poor week for markets, in fact the last two weeks of the month are often down. Be vigilant here as the trend has shifted downward.
Interest Rates are steady to slightly lower this morning as we may see more investors running to fixed income products before the Fed meeting decision.
Not much overnight news but the Fed’s next meeting gets started tomorrow and finishes up on Wednesday. The UAW strike is having a negative effect on investors as they worry this could linger. Crude oil continues to climb and is making its way to $95 per barrel.
Earnings coming out tonight. from SFIX and then tomorrow from AZO may point to the health of the consumer, somewhat.
Fed meetings are always watched carefully for their statement the comments by Chair Powell afterward. This one is as big as they come, as the market is trying to forecast a pivot or policy shift. Higher inflation though makes it difficult to handicap.
Horrendous breadth as this indicator remains on a sell signal. Thursday was pretty strong in up/down issues but Friday gave it all back and then some. We are in a challenging month for the markets, and with two weeks remaining we could see more downside.
Volume trends are bearish and turnover was elevated as options expired on Friday. With the big move down (reversal) Friday there is some heady resistance and big volume needs to come back to support higher prices.
A tight, rangebound market is what we have here. The SPX 500 is now trapped in a zone of 4430 and 4530 in the short term, a break could occur out of that area at anytime. Russell 2K though remains weak and often carries the rest of the market. The 200 ma at 182.4 is key to hold, if not there are lower targets.
The Internals
What’s it mean?
Nothing bullish about Friday at all, and following a strong Thursday internals that is discouraging for the bulls. Yet, as we head into a Fed meeting and the last two weeks of the month there is a potentially good setup for October. Ticks however show the concentration of selling on Friday, Put/calls remains elevated as cheap protection makes it easy to buy puts. VIX popped Friday above 14% but closed below, this underscores the action we have seen the last few months. Caution is warranted with so much uncertainty.
The Dynamite
Economic Data:
- Monday: Housing Market Index
- Tuesday: Housing Starts and Building Permits
- Wednesday: FOMC rate decision and economic projections, crude oil inventories
- Thursday: Jobless claims, Philly Fed Index, existing home sales, leading indicators
- Friday: GlobaL Flash PMI
Earnings this week:
- Monday: SFIX
- Tuesday: AZO
- Wednesday: GIS, FDX, KBH
- Thursday: DRI, MANU, RAD, FDS
- Friday:
Fed Watch:
Another important Fed meeting this week where policy changes will be discussed. The latest readings on inflation cannot be encouraging to the committee, but still the Fed Futures market is expecting another pause in their hiking campaign. It’s hard to think they would be less aggressive here, especially with a roaring economy that just won’t let up. The only positives the committee could see is maybe the jobs market is cooling down some. We’ll be paying very close attention to the new economic projections.
Issues/Stocks to Watch this week
Market Volatility – We have a big fed meeting this week and the market is sanguine. Therefore, it sets up for some surprises, so be ready for them.
Tesla – The EV car maker may have a slight advantage here as the UAW strike starts and hits Ford, GM and others. The company has been cutting prices lately to reduce inventory and that will hit their margins, but the stock is bouncing around in a range. Not horrible yet.
Dollar – The greenback has been remarkable this year, the best performing currency by far. We’ll be watching for a peak and turnaround if the Fed is much less hawkish in their statement and projections.
