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Technical Market Update

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What’s in Today’s Report:

  • Technical Market Update
  • Two Events to Decide the Year
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (All About Inflation This Week)

Futures are surging and global markets are up 1% thanks to apparent progress on the EU/Italy budget standoff.

Italian deputy PM Salvini said over the weekend that Italy wasn’t “stuck” on the 2.4% budget deficit, adding to the momentum that a compromise might be achieved.

Economic reports overnight were again disappointing.  Japanese flash manufacturing PMI missed estimates (51.8 vs. (E) 53.0), as did German IFO business expectation (98.7 vs. (E) 99.2.

There are no notable economic reports or Fed speakers today, so focus will remain on the tech sector.  Tech traded with some decent relative strength Friday, and if it can build on that today, then we could see a good bounce back rally.  Conversely, if tech fails to rally, then so too will the boarder markets.

Why Stocks Dropped (Again)

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What’s in Today’s Report:

  • Why Stocks Dropped Yesterday
  • More Housing Trouble?
  • Are “Gassy” MLPs a Buy?

Futures are moderately lower on momentum as Monday’s U.S market declines spilled over globally and international weakness is now weighing on futures.

Economically it was another quiet night as German PPI met expectations at 3.3% while UK Industrial Trends were better than expected (10 vs. (E) -5).

There was no new news on the Fed or U.S./China trade although expectations are rising for a Trump/Xi “truce” at the G-20 and a more dovish tone from the Fed.

Today will be another quiet day, at least based on the calendar, as we have no Fed speakers and just one economic number: Housing Starts (E: 1.24M).   Given that, focus will remain on tech and the super cap names specifically.  FDN needs to stabilize and bounce to help arrest this short term sell off and that ETF is now at the top of my quote screen, as it’s driving the markets in the very short term.

A Disconcerting ERP Update

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What’s in Today’s Report:

  • Equity Risk Premium: A Disconcerting Statistic

Futures are bouncing modestly after yesterday’s steep equity selloff as Secretary Mnuchin reportedly resumed talks with Chinese officials regarding trade but the budget drama between Italy and the EU remains a headwind.

Economically, the German ZEW Survey missed (badly): 58.2 vs. (E) 65.0 while the NFIB Small Business Optimism Index was more inline: 107.4 vs. (E) 108.0, underscoring the ongoing divergence between US and overseas data right now.

Looking ahead to today’s Wall Street session, there are no other economic reports to watch and only one of the two Fed speakers is during market hours: Kashkari (10:00 a.m. ET), Daly (5:00 p.m. ET).

Most of the more notable catalysts this week will come tomorrow (U.S. CPI, Chinese economic data, Powell speaks, earnings, etc.) but that doesn’t mean that downward momentum that began yesterday can’t continue so support in the S&P between 2705 and 2720 will be important to watch today.

Why the October Sell Off Was Different

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What’s in Today’s Report:

  • Why The October Sell Off Was Different
  • Valuation Update (the market is fairly valued here)

Futures are moderately lower following more disappointing Chinese economic data.

Chinese auto sales plunged 12% yoy in November and annual car sales growth turned negative for the first time since the early 1990’s, further fanning fears of a Chinese economic slowdown.

Earnings results were mixed as DIS posted solid numbers while EU corporate earnings were disappointing.

Today focus will be on inflation via PPI (E: 0.2%) and it needs to remain “Goldilocks” so as to not put more downward pressure on stocks.  We also have several Fed speakers (Williams (8:30 a.m. ET), Harker (8:50 a.m. ET), Quarles (9:00 a.m. ET)) although the next big Fed event will be Fed Chair Powell speaking on Tuesday.

Election Takeaways & FOMC Preview

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What’s in Today’s Report:

  • Election Takeaways (Short and Longer Term Implications)
  • FOMC Preview – All About the Fed Put
  • A Seasonal Pattern That’s Worked 100% of the Time

Futures are modestly higher on a relief rally as the U.S. mid-term elections provided no surprises.

As was widely expected, Democrats gained a small majority in the House of Representatives, while the Republicans expanded their majority in the Senate.

Economically, data from Europe was good as German Industrial Production (0.2% vs. (E) -0.1%) and Euro Zone Retail Sales (0.1% vs. (E) 0.0%) both beat estimates.

Today focus will be on the FOMC Decision (2:00 p.m. EST, E: No Change to Rates) and the key will be whether the Fed mentions recent stock market volatility.  If they do, that will be taken as a slightly dovish shift, and it likely will help extend today’s early rally.

Trade War Indicator

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What’s in Today’s Report:

  • A Realtime Trade-War Indicator to Watch

Futures are slightly lower with EU markets this morning on renewed political tensions despite upbeat economic data o/n while US focus turns ahead to the mid-terms.

Italian shares are down nearly 1% as the revised budget due on 11/13 is not expected to have the improvements investors previously hoped which could lead to further tensions with the EU.

Economically, the EU Composite PMI came in better than expected (53.1 vs. E: 52.7) which is a longer term positive as we need to see overseas data “catch up” to US growth metrics to help fuel continued gains in stocks broadly.

Today, trader focus is going to primarily be on the mid-term elections although results will not come in until after the close.

On the economic front, there is just one report to watch: September JOLTS (E: 7.110M) while there are no Fed officials schedules to speak ahead of the two-day Fed meeting that begins tomorrow.

Lastly, markets will remain sensitive to any trade war developments while technicals are still playing a major role in intraday price swings so if momentum is generated back towards 2700, the odds of another ugly break to the mid $2600’s would rise significantly.

Growth and Volatility

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What’s in Today’s Report:

  • Updated Market Outlook: “Growth Pillar” Remains Solid, but Volatility Not Necessarily Over
  • Weekly Economic Cheat Sheet

US stock futures are little changed this morning as last week’s gains are digested with focus remaining on the trade war with China, elections, and recent economic data.

There were no material developments on the trade front over the weekend however sentiment has deteriorated modestly since Friday which weighed on risk assets overnight, namely in Asia.

Additionally, China’s Services PMI fell 2.3 points to a thirteen month low of 50.8 in October which further weighed on Asian markets.

Looking into today’s session, there is one economic report to watch in the US: ISM Non-Manufacturing Index (E: 59.4) and there are two Fed speakers: Williams ahead of the bell (8:30 a.m. ET), and Kaplan later this evening (7:30 p.m. ET).

On the charts, 2705 will be a key support level to watch in the S&P today as a violation would likely see selling accelerate back down into the mid 2,600’s. To the upside, a break above 2,750 would open the door to a run back above 2,800.

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview
  • Technical Update:  Good Bounce, Poor Price Action

Futures are modestly higher on continued momentum from the Wednesday rally, as markets ignored more disappointing economic data.

For the second straight night foreign economic data disappointed, and this is a becoming a disconcerting trend.  UK Manufacturing PMI dropped to a 27 month low at 51.1 vs (E) 53.6.

AAPL reports today but after the bell, so the focus of the regular session today will be on economic data.  There are three reports to watch but the ISM Manufacturing Index (E: 59.0) is the most important one, followed by  Jobless Claims (E: 212K) and Productivity and Costs (E: 2.3%, 1.1%).  Bottom line, we need Goldilocks data (not too strong to make the Fed hawkish, not too weak to get us worried about growth) to further fuel this rebound.

Was Yesterday an “All Clear?”

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What’s in Today’s Report:

  • Dusting Off An Old Leading Indicator for Recessions
  • Was Yesterday an “All Clear?”

Futures are extending Tuesday’s rally thanks to decent overnight earnings and despite universally disappointing economic data.

FB earnings beat after the bell yesterday and the stock rallied 3% after hours, capping a decent day of earnings.

Economically, Chinese Oct. Manufacturing PMI declined to 50.2 vs. (E) 50.6.  Japanese IP and German Retail Sales also missed expectations.

Today focus will remain on earnings.  GM ($1.26) is the highlight but if the broad number of results are “ok” that should continue to help sentiment.  Economically the ADP Employment Report (E: 178K) and Employment Cost Index (E: 0.7%) are the two key reports, and both need to show “Goldilocks” readings (firm but not strong enough to make the Fed hawkish) for this bounce to continue.

Bounce or Bottom? Updated Market Technicals

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What’s in Today’s Report:

  • Bounce or Bottom?  Updated Market Technicals

Futures and global markets are sharply lower and have given back most of Thursday’s gains as it was another bad night of corporate earnings.

AMZN and GOOGL both posted disappointing earnings and that caused a resumption of the weakness in tech, which is dragging global markets lower.

The only notable economic data was German GkK Consumer Climate, which was unchanged at 10.6.

Today we get Initial Q3 GDP (E: 3.3%) but that won’t move markets unless it’s a major disappointment (remember GDP is very backward looking).

Bottom line, markets look like they are going to open sharply lower, so holding Thursday’s lows, especially in the Nasdaq (7099) is important, otherwise we could be looking at another Wednesday washout.