The Fuse
It’s the last trading day of the month and quarter, future are down modestly but only taking away a fraction of yesterday’s nice gains. Breadth was not good yesterday (see below) and that was our clue we may see a turnaround tuesday happen. Lots of window dressing occurred and that may continue into today.
Interest Rates are slightly higher this morning, across the curve yield moves are rather quiet. Still strong bids in high yield as these bonds recover from some recent losses. Fed funds are steady, seeing two cuts at the next two meetings (one each).
Stocks are down with Europe, about the same amount as the STOXX dropped .2% on smaller volume. FTSE fell modestly, gold is down off recent highs as is silver, crude oil down about .8%. US dollar index fell .2%. Yields are falling, German 10 yr bunds off 1bp, same for 10 yr US treasury yields. In Asia stocks fell in Japan, off .2% but gains in Hong Kong and Shanghai lifted those indices.
We are in another transition phase for earnings season, October starts anew but we will hear from Nike, Jefferies, Paychex and Conagra.
Stocks were strong Monday but underneath the surface the engine looks bad. We are moving now to a more seasonally bullish period, that starts this week. October has been known to be a bear killer, we are in one right now but suffice to say many of the biggest drops in stock market history have occurred in October. This month is likely to finish higher which is a positive for the bulls, but they need to build on that momentum in October.
We’ve been seeing much worse breadth these last few weeks, a few distribution days as well but not too many accumulation days. That could be problematic for the bulls going forward, but for now it does not present a problem. Oscillators are still in negative territory but it won’t take much more than a strong breadth day to turn that around. That might be the case early in the month, new highs are doing well against new lows.
Turnover was fairly weak on an up session, hence not much conviction here with the buying crowd. That could matter if selling picks up the pace today or tomorrow, but for now we’ll just consider it a blah day. Volume trends are just mediocre.
Seems last week’s pullback for three sessions was enough for the bulls to make a stand. We really only tested very short term moving averages like the 10 day, but that could be enough. Remember, the best trends barely give you a chance to get on board.
The Internals
What’s it mean?
Internals went back to their mediocre selves yesterday. That VOLD and ADD just lethargic, ADSPD barely climbed whil the ticks were mostly red but evenly distributed. TRIN was down as bulls tried to push markets higher but to no avail. Put/calls remain low and the VIX rose up again, trying to carve out a bottom around 15%. Not good if the VIX starts to rise again.
The Dynamite
Economic Data:
- 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:
- 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.
