The Fuse

Equity futures are rallying this morning trying to finish off a very strong week for the markets. Volatility is declining as we often see in front of a shortened week. Earnings have been a mixed bag lately but skewed to the positive side.

Interest Rates are steady to slightly lower as bond buyers tip toe back into the market.

China news overnight showed their housing market continues to deteriorate. Oil prices are up 1% whiled gold futures are up modestly. Some stories are trickling out following the APEC meeting between President Biden and President Xi of China. Some believe a few positives but it remains to be seen how that goes.

Earnings from Ross Stores were very strong and the company raised guidance, same with AMAT but a story about a criminal investigation into illegal shipments into China has pushed the stock down by about 9%.

A bit of rest the last couple of sessions following that huge up surge Tuesday. The last couple of sessions have seen turnover slow down, which is what you like to see if you’re bullish (and the market consolidating).

Breadth was negative but to be expected, this indicator is nearing a strong buy signal. Next week has only 3 1/2 sessions and there will be large drops in volatility, but the breadth will show us which direction the market wants to go.

Volume trends remain bullish, stocks retreated somewhat yesterday on lower turnover. This tells us the big money is not necessarily shedding stocks, a bullish sign after that large move up Tuesday.

Is the market ready to pause or push higher into the Thanksgiving holiday? Probably the latter, stocks often move up into the shortened week as volume dies down. Many traders’ desks will be empty as well the junior traders will be asked to ‘do no harm’. We still see 4,600 as the next level of resistance, 4,400 should now be good support.


What’s it mean?

Stocks were under pressure for the most part Thursday as they burned off a very overheated market. We can see from the VOLD is was down volume all session long but the indices did not budge much in the end. This tells us about underlying strength in the market and that future prices are heading upward. TICKS were mostly in the red too, confirming the days theme of a modest pullback. ADD was sharply negative and put/calls were on the rise, but this indicator is on a buy signal still. As always, we’d like to see some confirmation, meaning higher highs and higher lows, and if that happens the internals will turn even more bullish.

The Dynamite

Economic Data:

Friday: housing starts/building permits

Earnings this week:

Friday: BJ, BKE, FL

Fed Watch:A pretty loud roar by the crowd on Thursday after Jay Powell doused cold water on the markets. What did he say that caused a panic? Nothing different than last week, which said the committee remains vigilant and is looking to eliminate high inflation, and will keep rates higher for longer. Maybe the market was looking for some softer language, but Powell and his colleagues were not going to offer it. Plenty more Fed speakers this week with NY Fed Williams out early. 

Stocks to Watch

Inflation – For one of the first times in a few years CPI is expected to rise less than 2% on an annualized basis for October. That may soothe the Fed for a bit, but frankly we would need to see more data than just one month. It’s a good start and moves in the right direction. Core CPI remains a bit hot.

Options – It’s a big expiration week on Friday and we have some large open interest that is now in the money. Will these holders turn the screws on the bears and push the markets up towards 4,500?

Retail – Big retail names report earnings this week like HD, TGT, WMT and TJX. Further, we’ll have a retail sales report out on Wednesday which may give us a good read into holiday shopping as black friday approaches.