The Fuse
Equity futures are down once again for the third time this week as investors are in no mood to add stocks until a better ‘bottom’ can be found.
We have seen heavy distribution over the last week or so following the end of August. The selling has been rather orderly or contained with little panic, and even yesterday the dip buyers made an attempt. Futures are now pushing towards the lows from Wednesday, we’ll see if that holds as the markets are now short term oversold.
Interest Rates are steady to slightly lower on the long end of the curve as the ‘safety’ trade has returned this week. VIX is up slightly but still well under resistance but it is starting to trend higher. Fed futures are starting to price in two rate hikes into the end of 2023.
In a continuation from yesterday, China has drawn a line in the sand and is now forbidding citizens (gov’t employees mostly) from using iPhones (Wed). Today it is expected they will expand a ban in sensitive departments in government-backed agencies. This will likely hurt Apple in the short run but eventually it will be resolved.
Poor earnings and outlook last night from Dave and Buster’s and ChargePoint but decent numbers from GameStop and raised guidance from American Eagle have these up strong.
Apple will have an event next Tuesday and likely target the next iPhone release, while some big sector conferences start opening up around the world. These are important to follow as some ‘nuggets’ are often released at these meetings.
Another day of poor breadth brings back memories of August, when most of the days were down on poor breadth. After two rough sessions this indicator is now on a sell signal, we’ll see if buyers come back to the table later in the week to recover some lost ground.
A distribution day for the indices as heavy volume was the story. Big tech names were the reason as the selling that started the day became pretty intense. Buyers were nowhere to be found, and while we could see a bounce later in the week the indices are not offering many clues as to direction.
An ideal pullback to the 20 moving average yesterday and a bounce from there. We still see 4500 then 4600 as good resistance though, below suport at 4400 and then 4330. If that level breaks, there are plenty of downside targets.
The Internals
What’s it mean?
More selling that continued from Tuesday’s drubbing as we also saw a big rise in put/call ratio. Also, ticks were red and bearish most of the session but after falling more than 1% on the day the buyers came back to make the loss respectable. VOLD was down again all day as was the ADSPD, we may see a turnaround today but unless the volume returns we are sitting in a potential no mans land.
The Dynamite
Economic Data:
- Thursday: Jobless Claims, Productivity & Unit Labor Costs, gas/crude inventories
- Friday: Consumer Credit
Earnings this week:
- 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.
