The Fuse

Equity futures are slightly in the positive today as the VIX is moving upward. Trading desks are thin and are in ‘do no harm’ mode.

Interest Rates are moving higher this morning as inflation concerns permeate around the globe. Fed futures however are not signaling any movement at the next Fed meeting in three weeks. However, we’ll see what they were thinking three weeks ago when the meeting minutes are released tomorrow.

Oil rallied sharply last week on the expectation OPEC will keep their cuts in place. Energy stocks were strong Friday and may continue that roll this week. Crude is up nearly 2% in pre-market trading. The US dollar has been weak of late but gold has retreated as well, something notable as the market is sniffing out weakness in the economy.

Earnings tonight from ZM and as this week brings a much lighter schedule. Still, we’ll have a slew of retailers reporting such as LOW, URBN, JWN, and big tech name NVDA Tuesday evening. That will be a market mover.

Thanksgiving holiday this week so this is a short week for trading, only 3 1/2 days. A great time to sell some volatility and keep your positions small.

Breadth was surprisingly strong, likely helped by the strength in the small caps (up nearly 1%) and crude oil stocks, which followed the commodity higher on Friday. Rotation is good though, as we don’t want to see just a few stocks getting the bulk of the investment capital.

Volume was somewhat elevated Friday with the big option expiration at hand. We have seen some good turnover the last couple weeks as the markets make their move higher, but when volume starts to wane it means buyers are nascent and the markets may start pulling back. We are in a seasonally strong period but if buyers are not ready to add stocks then the sellers will get busy.

Clear support on the SPX 500 is at 4,400 and the moving averages (short and long term) are catching up. A few days of sideways consolidation should do it. As for upside the 4,600 level is within reach.

The Internals

What’s it mean?

Markets did not move too much (mixed) but the internals were still rather strong. Oil stocks were up sharply as were small cap stocks and that probably skewed the internals. Ticks were pretty positive and the VOLD bullish all day long as was the ADD. Notice the drop in the TRIN, which tells us better volume is coming in to stocks that are rising, especially on a positive day. That would be good news for the bulls. VIX remains sour and closed under 14%.

The Dynamite

Economic Data:

Monday: Leading indicators
Tuesday: Existing home sales, FOMC meeting minutes
Wednesday: Durable goods, oil inventories, Michigan consumer sentiment survey
Thursday: N/A
Friday: Global Flash PMI – November

Earnings this week:

Monday: A, ZM
Wednesday: DE

Fed Watch:So many Fed speakers out last week I suspect they are tired of talking. In fact, nothing on the docket for speakers this week. We’ll have the minutes from the last Fed meeting out midday Tuesday. Current odds are favoring a rate cut in 2024 as the Fed’s next move. 

Stocks to Watch

Volatility – Expect to see the VIX subdued this week as we often see during a shortened trading week. Volatility sellers get in front of the holiday, hence when the market re-opens next week there could be a giveback and higher VIX, which often means markets decline.

Retail – End of the week is Black Friday, otherwise known as the ‘Super Bowl of Retail’. We’ll have our eyes on Amazon, Walmart and other retailers who try to lure shoppers into finding early Christmas bargains.

Oil – Crude oil prices were up sharply last week and may continue this coming week. We see a rise eventually towards $85 a barrel, which could come soon on furious short covering and added buying.