The Fuse
Equity futures are bouncing back this morning after getting throttled a bit yesterday. Seems as if Chair Powell hinted the committee is watching equity prices and are concerned that valuations may be getting stretched. He’s not wrong of course, but growth seems to still be in place so they may ignore the rising stock market for now.
Interest Rates are mostly flat across the curve this morning as fixed income investors await the all-important PCE data on Friday. Yields on junk bonds remain tight, 2 year yields are stagnant as well. As for mortgages, 30 yr rates are about 4.78% and trying to decide which direction to go.
Stocks are rising modestly across the land this morning but not helped by Europe. STOXX was down .4% following Wall Street’s dismal performance, FTSE lost .2%. Gold is down slightly as is silver, crude oil is bouncing back. The US dollar index rose .2%. Stocks in Asian showed nice strength, Japan higher after a doy off, Hong Kong up 1.3% while Shanghai gained .8%. German 10 yr bund yields fell slightly.
Earnings from Micron last night were impressive along with stronger guidance into the future. The DRAM company has been showing good relative strength of late and the technical picture remains buoyant.
Tough day for the markets yesterday as some hesitant words by Chair Powell through everyone for a loop. It seems the Chairman does not like the giddiness following the recent rate cut, and perhaps his warning is to slow our roll. Yet, an overbought market can get sold at anytime and it could be extreme, so caution is always warranted.
Breadth started out strong with genuine upside in the small caps, which was the early guiding light. But as the day wore on there was a large bout of selling, something we have not seen in several days. That’s fine, but logging a distribution is not positive, so we have to be aware if these start to cluster. Oscillators are still mixed but another down session will push the Nasdaq through zero. New highs still healthy over new lows.
Volume rose up yesterday as the sellers had their way after midday. As mentioned, a distribution day was notched, that is not fatal but if there are more then even more caution is warranted. We may see a bit more volume coming in next week at the end of month/quarter.
A poor close and simply no buying interest after some midday selling. Could this be the start of a corrective phase? Quite possibly, but as we have experienced lately the dip buyers have been quite aggressive when the market falls towards support. The 20 day moving average is the one to watch.
The Internals
What’s it mean?
Some of the internals were actually pretty decent while others were poor. The VOLD did manage to post a solid gain, the VIX spiked but started to head down late in the sesssion, finishing off its highs. TICKS were mostly red and all session long, some serious sell programs. PUT/CALLS started rising again while the ADSPD flattened out. Look for more whipsaw action later in the week.
The Dynamite
Economic Data:
- Wednesday:new home sales, Mary Daly speaks
- Thursday:Austan Goolsbee, GDP estimate, durable goods, inventories, existing home sales, fed speak
- Friday:PCE, consumer sentiment, more fed speak
Earnings this week:
- Wednesday:CTAS, UEC, THO, KBH, FUL, SFIX, SCS, WS
- Thursday:ACN, KMX, BB, JBL, SNX, LUSE, COST, CNXC, LGCY, LPTH
- Friday:KNOT
Fed Watch:
The Fed policy switched to more dovish this past week and we’ll hear quite a few of the members talking this week including a speech from Chair Powell. It’ll be interesting to hear everyone’s viewpoint so close to the window of the prior fed decision.
Stocks to Watch
AI – It’s been a big summer for the AI stocks and there could be some more upside to go before the end of the year.
Bitcoin – The big crypto currency is looking to break out and that might just happen starting this week.
Market volatility – The VIX is extremely low and displays complacency by market players. That is a dangerous situation as we come up to quarter end.
