The Fuse

Equity futures are rallying modestly this morning as the bulls try to expand on their wins last week. The SPX 500 is trying to make it 11 wins in the last 13 sessions. Dow Industrials are within spitting distance of a new all-time high.

Interest Rates are slightly higher but mostly unchanged across the curve. After a sharp drop in yield on the 10 and 2 year it seems rates are settling down. The fed funds futures are still aggressively pricing in rate cuts for 2024 and now with the Fed agreeing that the time is now, we’ll see just how far ahead the futures market goes.

The UK market was closed overnight, Germany’s DAX fell .2%. gold is well bid as is crude oil, up nearly 2 dollars on supply shock fears from the Middle East. Stocks in Asia were mixed, Japan down but Hong Kong rallied, Shanghai was flat. Word of attacks in the Middle East have shaken things up considerably, we’ll see if that weighs heavier on market fear more than the positives from Chair Powell’s Friday speech.

Earnings are pretty big this week after a strong week. Of course, the big dog is NVIDIA, out Wednesday after the close. We’ll also hear from Salesforce, Box, Chewy, Abercrombie and Fitch, Best Buy, Dell and Marvell along with others.

Some crosswinds this week with NVIDIA earnings along with Salesforce, end of month, pre-holiday week trading and thin trading desks. Not to mention a favorable market condition thanks to the Chair Powell speech Friday and there is tinder ready to be lit for an attempt at a new all-time high. The SPX 500 is close and other indices are right there, too.

Breadth was lights out positive on Friday, finishing off a tremendously bullish week. That is important to keep the trend moving upwards.
Oscillators have moved to moderately overbought but could see followthrough on Monday. New highs are back to crushing new lows, this indicator on a buy signal.

Volume trends are improving but it is difficult to get excited when the turnover is just not very strong. Given the thin desk conditions and lack of trading in the pits (due to many on vacation) it sets the stage for waves of trading, up and down. We saw this Thursday and Friday. But the bulls will not be denied their time in the sun, which seems to be now.

Support levels have been tested and held firm. The 5,600 level on the ES futures were tested, the market bounced off that level. The Russell 2K (IWM) has our attention here, recent pullbacks to the 200 area held firm and now the IWM has bounced up 10%, ready to test those old highs. The last try failed in July but we think this makes it through the next time around. Nasdaq support at 19,700.

The Internals

What’s it mean?

That was some day for the bulls! Just look at the ticks and the VOLD, across the board bullish. With breadth 8-1 positive it is hard to get bearish on the statistics. VIX headed lower after word from Powell, we often see the VIX sell off on news releases. There was a strong bid all session with buy programs galore, just look at the ticks. Bodes well for a follow through day.

The Dynamite

Economic Data:

• Monday: Durable Goods, SF Fed President Daly interview
• Tuesday: Case/Shiller home price index, consumer confidence
• Wednesday: Atlanta Fed President Bostic
• Thursday: Jobless Claims, retail/wholesale inventories, pending home sales
• Friday: PCE, income/spending, consumer sentiment

Earnings this week:

• Monday: TRIP
• Tuesday: BMO, S, PVH, BOX, AMBA, JWN, YY
• Wednesday: ANF, CHWY, KSS, FL, BBWI, NVDA, CRWD, CRM, AFRM, OKTA, VEEV, HP, FIVE, NTAP
• Thursday: BBY, DG, AEO, OLLI, CPB, BURL, BIRK, FLWS, DELL, LULU, ULTA, MRVL, GPS, ADSK, MDB
• Friday: JKS

Fed Watch:

Last week’s speech by Chair Powell on the view of monetary policy was just what the doctor ordered. It is not too often the markets guess exactly right what the Fed is going to say or do, but it happened last week. A strong surge higher with Chair Powell pouring gasoline on the fire. That’s nice, until things get too giddy. Two Fed speakers scheduled this week (Daly, Bostic) so we may hear more about policy before next month’s meeting.

Stocks to Watch

NVIDIA – The big chip maker will report earnings Wednesday after the close, and no doubt they will hit the ball out of the park once again. Expectations grow each earnings report as the bar is raised, but the company continues to see more money flow into the stock. A huge report for tech.

Volatility – We have seen a huge run down in volatility the past few weeks, and given we are in front of a three-day holiday we may see the VIX tumble even more. Below the 200 day moving average would be a bullish situation for the markets.

PCE – End of week we’ll get the Fed’s preferred inflation gauge, the personal consumption expenditures. This indicator has been trending down slowly, if that continues it bolsters the Fed’s stance to cut rates sooner rather than later.

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