The Fuse
Equity futures are down early this morning as the hangover effect from low volatility is taking over. VIX fell sharply last week and is hovering near 13%, a very low level and worrisome as the market may respond and give back some recent gains.
Interest Rates are rising this morning as fixed income investors adjust their portfolios following weeks off during the summer. We may see more of this coming over the next several days, stocks have pushed far ahead and while in a new bull market phase, we would not be surprised to see bonds start performing.
Not much to drive stocks over the weekend, summer is over and now the last four months of the year are where traders will look to make up for lost ground. Dollar is higher, gold is down as the saudis continue to cut oil production.
A light week on the earnings front but we’ll hear from ZS, HQY later today.
After last Friday’s job report we’ll have some important data coming out this week including consumer confidence, PMI, ISM and the Fed’s beige book. We’ll also hear from Fed speakers Susan Collins, John Williams and Raphael Bostic.
First day of the month and breadth was fairly positive, this indicator is still on a fresh buy signal. Some more upside with breadth puts the overall indicator towards all time highs, but it’ll take several days of very strong breadth to do it.
Decent sized volume at the end of the week but we’ll see better turnover come after the holiday. It’s been a struggle with low turnover as it’s difficult to find a direction with purpose. We hope the strong volume returns to give us some better clues and guide us.
Still strong support at 4,400 but the 4,500 level is building. The recent drop to 4,470 on futures and the recovery from there is an important marker. The Nasdaq still has good support at 15K, while the IWM has good support at 183 and then 181.
The Internals
What’s it mean?
It appeared the stock market was in jettison mode after a pretty friendly jobs report. The VOLD sure had a good day, breadth was strong but stalled out from the beginning (notice the ADD decline). VIX got smashed as week would expect in front of a holiday weekend, but a change here is the drop in put/calls, which had been rising up. Ticks are positive too, which may spill over to today. On the VIX, a very low 13% reading here which is dangerously low and is begging for a rise up. VIX put sellers are looking for upside here.
The Dynamite
Economic Data:
- Monday: N/A
- Tuesday: Factory Orders
- Wednesday: Global PMI, ISM Non-manufacturing, Beige Book
- Thursday: Jobless Claims, Productivity & Unit Labor Costs, gas/crude inventories
- Friday: Consumer Credit
Earnings this week:
- Monday: N/A
- Tuesday: AVAV, ZS, GITB, HEQ
- Wednesday: GME, CHPT, AEO, VRNT, PLAY, SPWH
- Thursday: SAIC, DOCU, TORO, RH, ZUMZ
- Friday: KR
Fed Watch:
Several Fed speakers this week as fed funds futures dropped sharply last week after the jobs report hit. Perhaps the Fed is closer to done than many think.
Stocks to Watch
Interest Rates – We’ve seen a slippage in rates recently, we’ll see if overseas markets keep that trend going.
VIX – look for the volatility index to move back up following the long weekend.
Technology – These stocks have been hot the last few weeks, if they pull back we’ll be looking for some good entry points.
