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The Fuse

Equity futures are rallying this morning as the last two sessions completely wiped out Tuesday’s losses and then some. We have talked about how sloppy the action can get during this month and that still might happen, just be ready for any scenario. Bulls are anxious here and that could be a bad omen.

Interest Rates are modestly higher this morning after a decent trading day Thursday. There is little dispute that rates are heading lower, but it needs the Fed to step up and start the cycle, even if it is slow. 2 year yields are moving down, 30 yr treasuries hit 5% this week and backed off significantly. High yield is back to strength again as spreads are tight.

Stocks across the pond were slightly up overnight but France was lower, Germany modestly higher. The FTSE in England was flat, US dollar index fell .1% while crude continues its ride lower. Gold and silver, on fire lately are barely moved, they could have a big day following the labor report. Stocks in Asia were up, Japan higher by 1%, Hong Kong and Shanghai with strong days up 1.4% and 1.2% respectively. Yields across Germany and the US were largely flat.

Earnings from Broadcom last night were terrific, with strong guidance as well. Samsara and DocuSign were super strong and provided a strong outlook, meanwhile Lululemon hit the skids, providing awful guidance, the stock is getting hammered today.

Stocks battled their way to positive ground yesterday as the SPX 500 finds itself slightly in all-time high territory. Yet, the jobs market might make a huge impression today, and with the VIX in very low territory it seems markets could be vulnerable to a tumble.

Really good breadth yesterday, the first strong day in over a week as the bulls took charge early and never looked back. Oscillators are mixed here but still with a chance to get into positive territory on the Nasdaq. There is not much to argue about with new highs/lowsas this indicator remains on a buy signal.

Better turnover on the Industrials but we are still not seeing too much participation from the broader indices. That may change today of course after the jobs report is released, and if bonds sell off sharply we could see equities fall in kind.

We’ll say the recent pullback was a successful test after yesterday’s fairly strong move upward. Stocks continue to meander around waiting for ‘something’ to happen, whatever that may be could be the catalyst to jolt stocks out of this sideways movement. Is it next week’s inflation reports or the Fed meeting in two weeks?
 

The Internals

(Click on image to enlarge)

What’s it mean?

Now that’s more like it! Strong internals with the VOLD and ADD peaking at the end of the session. We have not seen that happen too often lately. The VIX fell sharply while put/calls settled in, Ticks were super strong and green all day, lots of buy programs. Today will be pivotal for more followthrough.
 

The Dynamite

Economic Data:

• Friday: jobs report for August, wages

Earnings this week:

• Friday :ABM

Fed Watch:

We have heard quite a few opinions from the those on the Fed about how/when monetary policy should shift. On Friday Governor Waller said ‘lets just get on with it’, meaning a rate cut cycle should start. That is not exactly where Chair Powell resides, his opinion weighs heaviest. Data still seems to show inflation is elevated beyond the Fed’s target but labor this week is going to be a key number.
 

Stocks to Watch

Volatility – Once again, the market remains complacent and could be paying it back huge this week. The VIX is sublime, residing under 16% for awhile now. It is not bearish until it starts to rise, which could be at any moment.

Nvidia – After strong earnings and guidance the stock took a hit on Friday. Can it stabilize and recover? Not much news to drive it in either direction, so maybe some base-building is in order.

Jobs – The August labor report will be watched closely on Friday to see if weakness continues from the prior months. It would only seem fitting after the BLS commissioner was dismissed to see numbers suddenly rise, but that’s a topic for another day.

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