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“Let chaos reign, then rein in chaos.” – Andrew Grove

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

Futures were firmly lower overnight but have staged a modest bounce off their lows as the S&P 500 inches into positive territory, and the Nasdaq is basically flat. Oil prices and Treasury yields are both helping as they reverse earlier increases, and gold and Bitcoin are both fractionally lower.

Asian markets were red across the board, with the largest losses in South Korea, where the Kospi fell 4%. The Nikkei was down nearly 3%, while onshore Chinese stocks fell over 1.0%. Rising yields remain a concern for the market as JGB yields were higher across the curve. Despite the rise in Japanese yields, Berkshire Hathaway CEO Greg Abel noted in a CNBC interview from Japan that none of the trading companies Berkshire has a stake in cited rising yields as a challenge and see the current situation as manageable.

European markets are also red across the board but not by as much as in Asia. The STOXX 600 is down 0.7% in early trading as long-term sovereign yields across the continent are at their highs of the year.

The economic calendar is relatively busy this morning with the ADP Employment report hitting the tape at 8:15 and coming in weaker than expected. While economists were forecasting an increase of 47K jobs, the actual reading was 9K weaker.  Still upcoming today, we’ll get Factory Orders and Durable Goods Orders at 10 AM. Then, along with those data points, Energy inventories from the DoE will hit the tape at 10:30, and at 2 PM we’ll get the Fed’s Beige Book.

Along with interest rates, crude oil has been a primary market concern lately as prices have been marching higher off the early July lows of less than $70 in WTI. While crude quickly rebounded above $90 from those lows, it was repelled by a downtrend line in place since the April highs. The downtrend line acted as resistance again in mid-August, but it wasn’t strong enough to hold in the latest test as the 50 and 200-DMAs are now both rising again. Crude oil remains well below its spring highs, but unless the President can pull a rabbit out of his hat with respect to the Middle East, the general trend is now higher.

Crude oil may be far from its highs, but Energy stocks have been making themselves comfortable on the new high list. With a two-day rally of 4%, the S&P 500 Energy sector cleared right through resistance from March and mid-August yesterday.

Yesterday, we pointed out that more stocks were oversold than overbought in the S&P 500 for the first time since early June. That remains the case heading into today’s session, but don’t blame the Energy sector for the weak breadth. As shown in the snapshot from our Trend Analyzer below, all but one of the sector’s stocks are up over the last week. Not only that, but Texas Pacific Land Trust (TPL) is the only stock below its 50-DMA and is one of just four stocks in the sector not at overbought levels. Unfortunately, Energy accounts for less than 4% of the S&P 500, so its strength has little impact on indices, and what’s good for energy stocks this year hasn’t been good for the rest of the market.

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