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The Fuse

Equity futures are quiet this morning as markets trying to find some direction. Overall this week little net movement but lots of volatility, what we would expect during a slow end of summer session. Buckle up though, big earnings are going to move markets today and later this week.

Interest Rates are up slightly this morning across the curve as fixed income buyers take some profits. The 2 yr yield remains trapped in a range of 3.65-3.9% while the 10 yr is sitting around the lower end of a downtrend, 4.258%. It currently stands right near the fed funds future. High yield remains very strong, making new highs again. Fed futures steady.

Stocks across the globe are mixed but Europe was higher, the STOXX up .3% led by gains in France. FTSE was up the same .3%, gold slightly off recent highs as is silver, crude barely down while the US dollar index rose .2%. Yields most held steady, US 10 yr treasuries up 1bp, in Asia Japan was higher by .3% but stocks in China fell, Hong Kong down 1.3% and Shanghai off 1.8%.

Earnings last night from Okta and MongoDB were terrific, those stocks rallying this morning. The big report comes out tonight with NVIDIA (NVDA) of course, but we’ll also hear from Snowflake, Veeva and Pure Storage.

After Monday’s rip lower the bulls were intent on bringing the green to the screen. That happened but it was some late program buying that did the trick. Some of the bigger names are churning right here but the ones with strong momentum are pushing higher. We may have some clarity later in the week, volatility remains rather low.

It was a positive day of breadth but not all that impressive. Perhaps the dip buyers were a bit gun shy, after all many of them got burned last week trying to catch bottoms before the big rally hit on Friday, and then Monday’s churn was a less than anticipated. Oscillators are barely green, it won’t take much to turn them down, new highs are printing very healthy levels, this indicator remains on a buy signal.

Another mild day of turnover as volume prints remain a fraction of normal levels. That is expected during this seasonally weak period and while fewer traders are around before the holiday. We may see volume pickup by mid-September and perhaps a strong day of volume Friday but no sooner.

A pullback to support and bounce is just what the doctor ordered for the bulls. Now the big test: How will the markets, especially tech, respond to NVIDIA earnings. In the past this report has been a huge driver of performance and seeing as though we are near month end and looking to end the month on a high note, it’s time to pay attention.

The Internals

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What’s it mean?

Back to lethargy for the internals. VOLD and ADD just pathetic here, no momentum from breadth or volume at all. Ticks were mostly red, a slew of sell programs hit early and often, the put/call remains low and VIX, moving higher early faded late in the day. It still is rather dangerous under 15%.

The Dynamite

Economic Data:

• Wednesday: n/a
• Thursday: Jobless claims, GDP revision, Waller speaks, pending home sales
• Friday: PCE (July), income/spending, inventories, consumer sentiment

Earnings this week:

• Wednesday: KSS, SJM, ANF, WSM, RY, MCFT, PLAB, DCI, NVDA, SNOW, CRWD, HPQ, VEEV, NTNX, URBN, FIVE, PSTG, NTAP TIGR
• Thursday: DG, BBY, TD, CM, BBWI, BURL, DKS, OLLI, LI, MRVL, DELL, IREN, ULTA, S, AFRM, GAP, AMBA, ESTC, WOOF
• Friday: BABA, DOO

Fed Watch:

It wasn’t a Fed meeting but it sure felt like one was happening going into it. Chair Powell flipped on everyone and is now seen as a bit more dovish but also slightly hawkish. The Chairman believes monetary policy conditions are too tight and that may warrant a cut at the next meeting or two.

Stocks to Watch

NVIDIA – The big chip maker reports earnings this week and will be the focal point of market players. Since last earnings the stock is up about 40%, a very strong move but they seem to deliver each time – we’ll see how it goes.

Google (GOOGL) – This stock finally hit a new all time high on Friday and really has some momentum in its sails. Can it continue? Good news has been coming for the company of late.

Breadth – We noted the strong breadth figures for Friday with the small caps leading. Oscillators are up as we expect but if today is also strong there might be more upside before the end of the month.

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