The Fuse
Equity futures are rallying this morning after Friday’s massive drawdown. On that day, the SPX 500 lost more than 1.5% as the index touched the 50 day moving average. The Nasdaq was hit the hardest though Apple did manage to post a gain (down this morning, however). Following the news of the weekend markets are shaking off any fears, but this is an important week to see if the uptrend remains in tact.
Interest Rates are modestly higher on the long end of the curve as the bond selloff continues. Friday’s respite from the selling was a fear-induced trade, and that is likely over now that the bomb dropping has ended (for now).
Over the weekend news of drone attacks by the Iranians on Israel was the focal point, but now that it is completed we can get to some semblance of order. As I mentioned in the chat room Friday, if an attack was made we would see a rally, not a selloff. It remains to be seen if this holds today, lots of short covering. Oil is down a bit while gold is slightly higher, but off the 2,400 mark from Friday’s high.
Earnings from JPM last week were good but when your stock is higher by 30% in the first quarter, well you need perfection just to stay up. The earnings were not enough to buoy the stock and JPM lost ground, as did C and WFC after posting good numbers. Today we have Goldman Sachs, Schwab, MTB and a few smaller names.Tomorrow am is a busy one with BAC, JNJ, MS, BNY, UNH and some medium-sized banks.
Stocks across the pnd were mixed, the German 10-year bund yield rose up slightly while stocks in Japan and Hong Kong were lower, China’s Shanghai index rose up 1.3%. Plenty of data this week and earnings to get the juices flowing.
Breadth was horrible as you might imagine. With stocks falling sharply at the open there was no chance for a good recovery. The Russell 2K, which had been leading breadth for awhile had a rotten day. New highs are being challenged by new lows, especially in the Nasdaq. This indicator is just clinging to a buy signal.
Volume spiked up on the Nasdaq, Dow and SPX 500 Friday, so notch another distribution day. This is about seven of these over the past few weeks as a trend is being established. If we cannot see any accumulation in the coming weeks (better volume on the up sessions) then this rally is in serious jeopardy.
We had good support for a few days at 5,200 for the SPX 500 but that fell hard, while 5,100 held firm. However, that might not hold this time around, the 5,050 area is pretty important for the index. Nasdaq still has good support at 18K but very little momentum to the upside. We may see more downside before the bulls can gather enough energy to take the markets higher.
The Internals
What’s it mean?
It was ugly from the start, there was no respite from the selling all day Friday. The VOLD finished poorly after a bad start, just getting worse by the hour. Ticks remained a constant red, we have seen quite a bit of heavy selling from the Nasdaq recently with these red ticks, hardly any green to speak of. The TRIN sky-rocketed as well to more than 3, that is not common. VIX shot higher, above 19 for the first time in months but settled down a bit. This was a warning shot to the bulls, no question.
The Dynamite
Economic Data:
Monday:Retail sales, biz inventory, housing market
Tuesday:housing starts/permits, industrial production/cap utilization
Wednesday:crude inventories, beige book
Thursday:jobless claims, existing home sales, leading indicators
Friday:n/a
Earnings this week:
Monday: GS, MTB, SCHW
Tuesday:BAC, MS, JNJ, PNC, UNH, IBKR, JBH, UAL
Wednesday:ABT, ASML, USB, AA, TRV, LVS, CSX, DFS, CCI
Thursday:DHI, ELV, NOK, TSM, NFLX, PPG, ISRG, ALK
Friday:AXP, PG, SLB
Fed Watch:
Stocks to Watch
Retail Sales – This will be an important report Monday morning. Is the consumer starting to fade some? March was supposedly a strong retail month but if it is the peak, the market may respond negatively.
Industrials – While the Dow only has a handful of names reporting, the industrial complex has many names delivering earnings this week. The Industrials and Transports are in correction territory, we’ll see how much of a bounce they receive.
Apple – We’ll keep one eye on Apple, which stunned the markets on Thursday with an announcement about new PC’s coming with AI capability. That led to the strongest move for the stock in over a year. We’ll see if there is followthrough.
