Markets are relatively muted this morning, DOW FUT down 0.14%, S&P down 0.39%, NAS down 0.79%, Oil higher by 1.2% @ 91.85, gold up 0.06%, and the US 10yr up 4bps @2.8%. Europe is mostly in the red and Asia closed mixed.
Today is a big anticipation day for markets as investors are deciding how to position themselves for tomorrow’s CPI print. Citi has said that they expect a 100bps hike in Sep after the jobs number last week. Trump’s house in Mar-a-Lago was raided by the FBI, unsure what they were looking for. The UK is issuing “extreme heat” warnings for England and Wales, across the world rivers and lakes are drying up to unseen levels in years. In Italy, low water levels in the river Po uncovered a WWII unexploded bomb and low levels in the US’s Lake Mead are uncovering multiple human remains. The China-Taiwan saga continues, more drills from China, and the US is joining some military drills with India along the Chinese border. Taiwan’s foreign minister said that China is in violation of internarial law, is Xi trying to poke the hornets’ nest or just show their power? Oil began ticking up significantly around 6am after reports of a Russian crude pipeline was halted. Ukrtransnafta, the operator of the Ukrainian pipeline network has said that they could not make their prepayments for the crude due to EU sanctions. This pipeline services Hungary, Czech Republic, and Slovakia. This network of pipelines that service Poland and Germany are unaffected at this time. Crude has given up all gains since the Russian invasion. We still like this investment theme, fundamentally strong companies in an uptrend with a big pullback provide a buying opportunity. Keep an eye out for our energy note coming out soon from our Oil guru Bilbo Baggins. Semi stocks are under pressure this morning after MU issued a warning about lower demand for DRAM and NAND chips.
The internals have been a troubling thing to dissect in this rally. The market has largely traded flat this month and hovering right below a key resistance line that ultimately put down the rally in late May. While most of the “bottom” indicators were not reached in July we have seen some good improvements in the past month. New Highs are exceeding new lows, albeit marginally. The percentage of stocks above their 50dma is holding strong around the 75% level still needs to be higher before we go all in but holding up here. While looking better, the YTD losers are the ones rallying, breadth is relatively low, and 10s2s are still deeply inverted. Not convinced that we are out of the woods yet; we will be much more convinced when the DOW & SPX can both close above the 150dema. It seems like a make-or-break moment for markets with tomorrow likely the deciding factor. A technical note will be out later looking at this rally vs previous bear market rallies.
WHC TOP 5: PCTY, NET, ETSY, CROX and EXTR