The Fuse
Equity futures are mixed and quiet this morning as traders await the April CPI number along with retail sales for last month. Recall the CPI from March was pretty hot and caused a market meltdown. Today economists predict a .4% monthly rise in CPI and a slowdown in retail sales from March.
Interest Rates are lower this morning likely anticipating a better CPI figure. It makes sense that prices are starting to cool down, if the there is a trend setting pattern both stock and bond markets will be pleased. Yesterday’s PPI was hot but prior revisions downward made it a non-issue. We saw markets rallying up from lower levels which in itself was a positive.
Gold is pressing higher this morning, up about .5% while crude oil is down slightly. China stocks edged lower last night following news that President Biden is raising tariffs on Chinese electric vehicles among other products. The meme stocks are back with big moves recently in GME and AMC, though they have come down sharply from nosebleed territory. Stocks in Europe gained about .4%, the dollar is down about .2%
Earnings were sparse last night, nothing really prominent to move markets. This morning we have Monday.com, always a volatile mover and Dole, MakeMyTrip as well. Later tonight we’ll hear from Cisco and a few other smaller names.
Pretty solid move for the indices as the Nasdaq pushed to a new all time high. The SPX 500, for its part had a strong day and is within a whisker of new highs tagged back in March. We mentioned recently the strength in cumulative breadth, which reached an all time high and that new highs across the board were forthcoming. Today’s CPI and retail sales report will tell us how tired or energetic the bulls are here.
Very strong breadth keeps this indicator on a buy signal. Oscillators turned up again as they remain on buy signals. New highs have stalled somewhat but is still on a bullish signal, we have yet to see an expansion of new lows. Yesterday’s impressive move was indicative of what we have seen recently, the strong breadth is supporting higher prices.
Strong turnover, especially in the Russell 2K as the indices notched another accumulation day. This makes several over the past few weeks, and with strong volume trends with prices making higher highs, higher lows the momentum of the market will be difficult to turn back. More volume at high levels tells us these buyers have conviction.
In the pre-market the ES futures fell sharply but bounced back hard following the rather hot PPI number. That was telling, as buyers intended to get in regardless of the inflation reading, which was rather hot. Nasdaq made a new high, it might be the SPX 500’s turn to do the same today or later in the week. The Russell 2K has good support at 205, we still see resistance at 208 and then 212 before much larger move can occur.
The Internals
What’s it mean?
We pretty much only need to see the power in the VOLD to tell us how the day went. This indicator ran hard all day, helped in the beginning by good strength in the IWM, solid ADD numbers (which dived and then recovered). The TRIN was down sharply as one would expect when the VOLD beats the ADD. VIX moved down after an initial rise, ticks were moderate early but turned sharply green later in the day. This bodes well for the remainder of the week (for the bulls).
The Dynamite
Economic Data:
- Wednesday:April CPI, retail sales, business inventories, housing market index
- Thursday:jobless claims, industrial production, import/export, housing starts/permits
- Friday:Leading indicators
Earnings this week:
- Wednesday:MNDY, CSCO, DT, DOLE, MMYT
- Thursday:WMT, WMS, GOOS, UAA, JD, BIDU, AMAT, FLS, ROST, TTWO
- Friday:
Fed Watch:
Stocks managed to forge ahead this past week after some dueling fed speakers were out Friday. Goolsbee (Chicago) and Kashkari (Minneapolis) were trying to explain their views and were certainly at odds. This coming week has Chair Powell speaking on Tuesday with a slew of other speakers on the schedule. Some more hawkish than others. With some data sprinkled in between, will we see simultaneous responses?
Stocks to Watch
Gold – The yellow metal had a stellar week after a mild corrective period in April. We still see gold making a run to $2,500 eventually, especilly if there is continued worry about sticky inflation.
SPX 500 – New highs are not far away, the last time the index made a run there it fizzled out. This time around, breadth and new highs are strong, so this may be the time to push upward. If 5,265 is exceeded, we see a move to 5,350 pretty quick.
VIX – Once again, the volatility index is quite low and that means the market is complacent about risk. That can last awhile, and in fact a few more days of this will actually cement a market buy signal, if the 20 day moving average of the VIX crosses under the 200 day moving average and confirms. That could happen by Thursday of this week.
