The Fuse
Stocks are bouncing nicely this morning following a quiet weekend of news. Stocks rallied Friday and are trying to followthrough to the end of the third quarter.
Interest Rates are declining as bond investors come back to the fore. We see tight spreads in high yield, 2 yr is flat while fed futures remain steady.
stocks in Europe are higher this am, STOXX up .3% led by small gains in France and Germany. Yields are falling, German bunds down 3bps as are US treasury 10 yr, gold is up sharply, over 1% and silver is rally. crude is down on expected supply issues, the dollar index fell .3%. Stocks in Asia were mixed with Japan down .7%, but Hong Kong up 1.9% and Shanghai gained .9%.
We are in the transition phase for earnings season, October starts anew but we will hear from Nike, Jefferies, Paychex and Conagra.
It seems strange when volatility is down and markets go down as well, but that happened all last week. The VIX tried to get up above 17% and initially seemed to have a nice bid but the vol sellers were not having it. Given the fact markets had been up so much to start September it made sense to give back some ground, markets don’t go up everyday forever. That being said, a mild corrective period may be over as bullish seasonal trends take over later in the week.
The breadth was strong and actually led the market higher on Friday, though this indicator is still in the bearish camp. We like to see good breadth, strong volume and positive price action to determine the health of the market. There is little to dispute the fact markets are bullish right now but that can certainly change if the breadth gets worse. Oscillators are still bearish but new highs are exceeding new lows, that is an intermediate bullish sign.
Volume levels were poor this week as we mentioned many traders were out this past week and will be until this coming Wednesday. This is the jewish New Year holiday season, traders step away for about 10 days and return after Yom Kippur. Bullish seasonal trends return in October and that may also be a catalyst to buying more stock, if the conditions remains favorable.
Support levels were tested this week but some (even I) would say not enough testing. Remember, we don’t always get what we want especially when it comes to the price action. So, if that brief three day pullback was it, then so be it. Friday’s low is important now, it was simply a gap fill and then buyers stepped right back in.
The Internals
What’s it mean?
Internals were pretty strong this past Friday, check out the VOLD move and the ADD, up sharply. ADSPD nearly finished at a trend up day, TICKS were heavily green all session long, put/calls down and the VIX straight down. A win for the bulls.
The Dynamite
Economic Data:
- Monday:Fedspeak, pending home sales
- Tuesday:more fed speakers, JOLTS, consumer confidence
- Wednesday:ADP, construction spending, ISM, PMI final, auto sales
- Thursday:jobless claims, factory orders, Lori Logan (dallas)
- Friday:Sept NFP, wages, service PMI, ISM, Philip Jefferson
Earnings this week:
- Monday:CCL, JEF, PRGS, MTN
- Tuesday:UNFI, PAYX, NKE
- Wednesday:CAG, RPM, RZLV
- Thursday:ANGO
- Friday:N/A
Fed Watch:
We had several fed speakers out last week talking about fed policy and the economy. Most of them tipped their hands to show where they stood on the last policy meeting, which ended with a rate cut. The committee sees a couple more cuts coming this year and slowing down the pace considerably in 2026. The jobs report this week will be watched carefully, but it seems even if it is weak then two cuts may still be right. Chair Powell this past week mentioned stock prices perhaps being a bit high.
Stocks to Watch
Banks – The financials had a pretty nice week considering the markets were lower. Perhaps they are setting up bullishly before reporting in a few weeks, that makes sense.
AI – Stocks have been all over the place as the AI revolution rages on. However, the main catalysts are not there for a month or so unless some shocking news hits the tape. The big names may be entering into a consolidation phase for a bit.
Gold and Oil – Gold has been a big winner so far in 2025, but crude is also on the rise. Further, refiners have started to run hard and that may lead to higher gas prices eventually. This group finally found some love this last week.
