The Fuse
Equity futures are bouncing back this morning after getting whacked the last couple of sessions. The SPX 500 has lost more than 115 points in less than two sessions, and while we could believe the selling is completed the markets are not all that oversold yet. However, we expect to see a respite here, but the trend is down for now.
Interest Rates are steady to slightly lower today after bursting higher on Thursday, levels not seen since 2006. The bond market is worrying about inflation and growth.
The fallout from the Fed meeting hit hard as traders decided a risk off approach to everything was the right course of action. Bonds sold off hard yesterday as yields rose, we found out the Fed’s balance sheet fell sharply as they were selling bonds hand over fist.
Nothing to report on earnings, yesterday morning Darden beat but issued poor guidance. Next week will be quiet but with Nike, Accenture and a few others.
More downside action as the support was broken to the downside and now we’ll see if buyers step in. It is highly unlikely before the end of September as this is the most bearish time of year (sentiment-wise). The SPX 500 has now closed below the August lows.
Some of the worst breadth we’ve seen in some time. More than 6-1 negative as the rout was on from the start. The selling was a spillover from Wednesday but make no mistake, the market is in a correction. New lows just swamping new highs here and have been for weeks.
Another distribution day makes it tough for the indices to pick up and rally. High intensity volume and big ticks (see below) are the hallmarks of these selloffs lately, and there is no respite whatsoever. Markets are up in the face of higher interest rates, that is not bullish.
The wide range still exists but for how much longer. In literally a few sessions the SPX 500 is back to the 4330 area, which would need to hold else there is plenty more downside to be had. The NDX is in terrible shape, a break below 14.5K would send this index far lower.
The Internals
What’s it mean?
We could almost repeat yesterday’s comments, but we’ll add some freshness here. The VOLD was absolutely mauled, the ADD also down hard but the put/call really sent a message closing above 1. ADSPD showed a trend day down and the ticks – whoa the ticks! heavy negatives all session long. VIX closed above 17% as the term structure flattened out.
The Dynamite
Economic Data:
- Friday: GlobaL Flash PMI
Earnings this week:
- 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.
