The Fuse
Equity futures are in rally mode, continue the strong week and pushing the indices up and through new highs. Stocks are overbought here but dips are being bought by the pros. That will end at some point of course, but until a large break occurs we could have more upside to go. We have a five day week but a holiday coming up, often times volatility gets smashed in front of a holiday.
Interest Rates are steady this morning as a lack of interest in the bond market is current. Rates have come down slowly but with some feeling, and suddenly with the data there is interest in fed funds futures, perhaps a rate cut or two is actually coming by year’s end.
Precious metals continue their rise with silver heading towards $30 per ounce. Gold is also on the move, this morning moving up towards $2,450 per ounce level, following recent runs higher in copper and other commodities. This is clearly signaling demand for hard currency with a reflection of a weak dollar. If that happens due to a weaker economy, look for gold and silver to continue higher.
Earnings news this week are looming large with NVIDIA set to report on Wednesday after the close. We’ll hear from retailers this week too, including LOW, M, TGT, TJX and DECK. Tonight Palo Alto reports along with Zoom and Keysight. Tomorrow we have AutoZone, Lowes and Macy’s among others.
Get your 40K hats out! The industrials closed above this ‘magical’ level Friday for the first time ever and is poised for a followthrough session. After joining the SPX 500 and Nasdaq in the new high division, stocks in the Dow have made a sharp turn higher and look ready to continue upward. Most of the 30 names are overbought here as well. Oil futures are slightly lower, which may change after a helicopter crash killed the President of Iran. China held rates steady overnight, European stocks were higher overnight.
Stocks have cooled down from the hot week as breadth simmered down a bit from the explosive moves early in May. After reaching new all-time highs with cumulative breadth the prior week, new highs were seen in the indices. Remember, there is only so much money out there to buy stocks, fund managers are willing to put capital out there but when the dollars run out they have to wait. Periods of digestion usually follow.
Volume expanded a bit Friday thanks to the option expiration day, but we could see it pull back a bit this coming week as the Memorial Day holiday approaches. We may not see too much volatility and as a result volume trends may be reduced. After the past couple of sessions that would be fine, if the markets do not break support on higher turnover.
The SPX 500 finished just under 5,300 but it was a new weekly high for the index. There is support at 5,250 and a bit lower at 5,220, while the Dow closed for the first time above 40K. It’s been a spectacular run here and it may not be over, the Industrials are lagging the Nasdaq and SPX 500. Nasdaq remains solid as many names are hitting new highs. Support at 18.5K for the Nasdaq as 20K is not far off.
The Internals
What’s it mean?
Not much excitement in the internals on Friday, but we did see a last minute bullish move. See it in the VOLD, but the ADD barely climbed, this was more likely short covering and option selling (puts) more than anything. Ticks were moderate for the NYSE but the Nasdaq was pretty weak most of the session, you can see the accumulation of the red candles. VIX plunged again, there seems no desire for protection here.
The Dynamite
Economic Data:
- Monday:N/A
- Tuesday:N/A
- Wednesday:Fed meeting minutes, existing home sales
- Thursday:Chicago Fed National activity index, SPX global flash and PMI, New home sales
- Friday:Durable Goods, Michigan consumer sentiment final
Earnings this week:
- Monday:PANW, TCOM, ZM
- Tuesday:AZO, EXP, LOW, M, TOL, URBN
- Wednesday:ADI, DY, TGT, TJX, NVDA, SNOW, VFC, ELF, SNPS
- Thursday:BJ, RL, SCVL, DECK, DLTR, MDT, INTU, ROST, WDAY
- Friday:BIG, HIBB, BKE
Fed Watch:
With some better data of late one would think the Fed committee members would be willing to ease up a bit on the hawkish rhetoric. One would think…but it’s not happening. We have several fed speakers this week, nine early in the week. Last week Chair Powell pretty much reiterated what was said at the last meeting, but that was before the better than expected CPI.
Stocks to Watch
NVIDIA – The monster semiconductor company will release earnings after the close Wednesday as many are looking for some strong numbers and guidance. They have rarely disappointed the past few quarters, at some point they will not meet those lofty expectations.
VIX – Volatility is down in the dumpster once again, closing under 12%, which is a danger zone. Could it go lower? Of course, and with the holiday coming up that is a strong possibility.
Retail – With last week’s poor April retail report it’ll be interesting to see/hear what many companies say this week. Several names will report like Target, Lowes, TJX and Ross. Will they reiterate the consumer slowing down?
