Morning Note: Setups Not Supportive

Last week’s (for most of Asia) downward momentum in equities carried through to last night’s session, with all but 2 of the 16 markets we track trading notably lower. Not so much for Europe, as 10 or the 19 bourses we follow are trading higher so far this morning. The U.S. is looking to rebound a bit off of Friday’s drubbing with the Dow threatening a 170-pt open, the S&P set to start the day roughly .5% up, the Nasdaq just barely in the green and the Russell 2000 in rally mode with its future contract pointing to a 1.4% open.

The VIX (SP500 volatility) is .8% higher this morning, at a dangerously elevated 35.

Oil’s up .9%, gold’s up $1.80, silver’s down .65%, copper’s up .53% and the ag complex is tilting green.

The dollar’s down .20% and the 10-yr U.S. treasury note’s yield is up a titch (price lower).

We can call the signal in the above mixed, confused, ambiguous, take your pick…

As I’ve been pointing out, the down days have looked a lot more bearish than the up days have appeared bullish of late. Friday was no exception: 

Friday’s volume was huge; 61% above Thursday’s, 42% higher than the 10-day average and 32% above 20-day average volume. 89% and 78% of S&P 500 and Nasdaq Comp members closed in the red respectively. 

As for credit markets, the latest trends have been, for the most part, in the wrong direction. 

Here’s our color-coded report on spreads and benchmark ETFs we track daily to keep abreast of credit market conditions:

In a nutshell, neither equity nor credit market internals are offering supportive setups for continued strong gains in the stock market from here, at least not at the moment. Of course that can change in a hurry in the stimulus-centric environment we presently find ourselves in.

In this evening’s note I’ll update you on the short-interest setup that has helped keep the equity markets buoyed the past few weeks. 

Have a nice day!


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