The Fuse
Equity futures are stagnant this morning as traders await the all-important PCE data for August. The expectation is for an in line number that mostly matches July, but this is an indicator the Fed pays close attention to. If inflation ignites it will show up in the PCE first and foremost. Markets have aimed lower three sessions in a row and if today is down there could be some testing of the 20 ma, which is not far away.
Interest Rates are down modestly as bond buyers step in but that may not last too much longer. Yields have been on the rise the last week or so, if the PCE number is hot markets will sell off. VIX is at 17% and is starting to rise again which could be troublesome above 18%. 2 year yields are calm, high yield spreads are tight and fed funds futures steady with the market looking for two more cuts this year.
Stocks are up slightly but over in Europe a nice rally that pushed those indices higher. STOXX was up .4% led by strong performances in France and Germany. The US dollar index was flat, FTSE added .1%, gold is up modestly but could rise up later today, silver remains well-bid while crude oil is flat. Stocks were down hard in Asia, Hong Kong slid 1.3%, Shanghai off .7% and Japan down .9%. Yields on long bonds in Germany and the US rose slightly.
Earnings last night from Costco were pretty decent but the stock is selling off a bit this morning. We may see this stock moving a bit higher in the weeks to come.
Sellers just keep piling on, looking to reach that magical 20 day moving average. The SPX 500 nearly hit it square on the lows, close but no cigar. Other indices are still a bit away from that level, which is nothing special other than a spot where dip buyers have been active. It might not happen this time around, but we will certainly be paying attention if support holds firm.
Another bad day of breadth keeps this indicator on a sell signal. That’s bad news for the bulls, and the longer this indicator stays bearish the harder it will be to rise up. Further, we could see lower highs, lower lows appear and that would lead to a market downtrend. First things first however, oscillators are bearish but are approaching overbought, but new highs continue to ravage new lows, and as such the trend will remain bullish at least in the long term.
We were fearful of a distribution clusters but here we are. Only a handful but they can stack up quickly if you’re not paying close attention. What’s it mean? Basically big money is distributing stock for whatever reason. Often this time of year hedge funds have distribution requests from clients and have to raise cash to meet those requests. That means sell stuff that you hold, there is a deadline and is often the end of October, so time to watch out.
As mentioned prior the indices are overbought and due for a pullback, the logical place is the 20 day moving average. Of course, if that gets broken there are more layers of support and more damage that can be done. Let’s wait and see if the first level holds, three down days in a row is a lot for the markets to handle, the bulls are not going to give it up that easily.
The Internals
What’s it mean?
A repeat of yesterday with horrific internals. The VOLD just slammed all day, ADD finished on its lows while the ADSPD nearly had a trend down day. Ticks were red all day, big sell programs slammed the market from the opening bell. VIX was higher but fell end of day and really did not contribute much. More a lack of liquidity than anything, erratic price action. Maybe something better quality today.
The Dynamite
Economic Data:
- Friday:PCE, consumer sentiment, more fed speak
Earnings this week:
- 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.
