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The Fuse

Equity futures are backing off following a rather unproductive expiration Friday. We will have volatility for August expiring tomorrow, and we are now seeing the VIX catching up to the futures, which is causing a bit of selling in the equity futures. We’ll see how much this lasts but the downside looks rather contained within .5% next couple of sessions.

Interest Rates are slightly lower today as some short covering is happening in front of Chair Powell’s keynote at Jackson Hole this week. I am not expecting that speech to have much influence but the markets may see it differently. Chair Powell does not like to steer policy outside of committee meetings, though the topic of employment is an important element to strategy and monetary policy.

A slow news weekend but the world is watching events in Eastern Europe and Jackson Hole this week. STOXX in Europe were flat, the FTSE added .2%, the US dollar index also flat. Gold is pushing again on 3,400 per ounce, silver is trying to make a run at $40 while crude is up modestly after India cut a deal for more oil from Russia. Bond yields in Germany and the US fell 2bps, in Asia strength in Japan up .8%, Shanghai gained the same but Hong Kong was flat.

Earnings are on tap this week, a big week for retail with Home Depot, Walmart, Target TJX, Ross Stores and Estee Lauder among others. Smaller names will also be reporting but the big ones will move markets.

Nothing more important this week than hearing what Fed Chair Jay Powell has to say at the Jackson Hole conference. The theme of course is about employment and labor markets, and we’ll hear him talk about the surprising strength in labor (and no doubt the recent firing of BLS commissioner). In recent years Powell has used this conference to telegraph policy but NOT changing it, rather to dictate what could be expected. Other central bankers will present their views as well, it will be an interesting time as market liquidity is thin and seasonal trends are bearish.

Breadth was poor again Friday and that puts this indicator back in a sell signal. Cumulative volume breadth made a new high though and that is bullish, but oscillators are back to negative after having one bullish day in the spotlight. New highs are expanding and that means this indicator (above 100) is in the bullish camp.

Volume ran up on expiration Friday as expected with some volatility early in the day. An acceleration of selling hit towards the last 30 minutes of trading as we saw several sell programs triggered. If there were many options exercised over the weekend that may spill over Monday to a bout of selling for a few hours.

It appears the Nasdaq is the first to make a run towards support. The SPX 500 and Russell 2K are far enough away to let the moving averages catch up, and that would be fine for the bulls. However, that is just a bit of tight consolidation which might frustrate both bulls and bears as the markets may just be stuck in place for a bit longer.

The Internals

(Click on image to enlarge)

What’s it mean?

A pretty weak showing Friday as the internals were completely blown out. It wasn’t all that negative but not positive either, ticks were spread out so several buy and sell programs all session long, VOLD and ADD back to their miserable performance from the prior week. VIX seems to be starting a mini uptrend which can be hurtful to the bulls, so that is something to be watched.

The Dynamite

Economic Data:

• Monday:Home builder confidence
• Tuesday:housing starts, building permits
• Wednesday:Minutes from the prior fed meeting
• Thursday:Jobless claims, philly fed, PMI services, manufacturing, existing home sales, leading economic indicators, Jackson Hole conference begins
• Friday:Jackson Hole conference

Earnings this week:

• Monday: PANW, FN, BHP
• Tuesday: HD, VIK, ASO, MDT
• Wednesday: TGT, EL, ZIM, TJX, ADI, BIDU, DY, NDSN, COTY
• Thursday: WMT, HOV, CSIQ, ZM, WDAY, INTU, ROST
• Friday: BJS

Fed Watch:

It’s the big conference everyone has been waiting for: Jackson Hole. This annual get together of central bankers, economists, analysts and reporters is a pilgrimage for those who follow central bankers. Chair Powell will be speaking here and may shed light on Fed policy. We’ll be listening closely.

Stocks to Watch

Retail – Following Friday’s release of strong retail sales data, we’ll have some big names reporting this week. We expect good earnings but more importantly some clarity on how tariffs are affecting shoppers, inventory and pricing.

Nasdaq – As mentioned earlier, it appears the Nasdaq is taking a leg down but it could possibly be in for a sideways consolidation. Tech shares in this index have been on fire lately and could be due for a rest.

Interest rates – We saw rates pop higher Thursday after the hot PPI number. Without much data other than housing this week we watch fixed income closely to see if there is interest in buying bonds at lower levels.

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