The Fuse
Equity futures are mixed this morning as the SPX futures are up nicely as are Nasdaq futures, paced again by a strong pre-market by NVIDIA. This behemoth has long tentacles and spreads it’s wings wide to touch many tech (and non-tech) firms. As we approach the end of the month and a split coming for NVIDIA in about 10 days, no doubt investors are scrambling to buy shares to take advantage.
Interest Rates are moving slightly higher as bond sellers come back from the long weekend and have started selling their inventory.
It is no surprise to see a bit of profit taking here, fixed income has been up strong all month long. We might see a bit more volatility as we approach the end of the month.
Coming back from the long weekend is often treacherous, but this bull market is roaring ahead. Oil prices are bouncing back as traders look ahead to the OPEC+ decision on production cuts. Gold is higher as well as silver. European markets were flat while indices in Asia slipped a bit.
Neal Kashkari, Minneapolis Fed President is slated to speak today and may offer some cautious guidance once again. Apple is on the move as well, a report saying Apple iPhone shipments to China were up 52% over 2023.
Earnings calendar this week is a strong one with Salesforce, Dell, Cava, Okta, Ulta Beuaty and Best Buy reporting earnings. Several names have strong ratings in the Investors Business Daily along with strong charts, so there could be a nice move up for these names post-earnings report.
That was a strong rally Friday and while turnover was poor, that positive was that Thursday’s turnaround session (down) was not continued. Why does it matter? As the markets were clearly overbought earlier in the week, it became vulnerable to selling pressure, investors/traders willing to take chips off the table at all time highs. With a strong money already accounted for and news out from NVIDIA, that left the market vulnerable.
Breadth was pretty strong, as it appeared this indicator was headed for a sell signal. That did not happen, barely missed that turn.
We’ll call breadth neutral here, the oscillators recovered off low levels but remains negative. New highs continue to expand, that breadth indicator remains on a strong buy signal.
Volume was a fraction of Thursday’s selling level, and while markets were up that low turnover means the rally lacked conviction.
We could chalk it up to a pre-holiday session, and that makes sense. But we should remember sellers lurk around every corner. Take Thursday’s wild action for example. The volume was low as markets rallied on the NVIDIA earnings news, as once some economic data came through the sellers hit the market hard. That can expose the weak hands.
Good thing the SPX 500 recovered 5,300 on the close Friday. That level was tested and quickly recovered, and means there could be some followthrough this week. Of course, we have the end of the month coming up, and with indices up strong in May perhaps some window dressing. We still seel 18,500 as good support for the Nasdaq, and 39K for the Industrials.
The Internals
What’s it mean?
Better internals Friday, certainly a sharp turnaround from Thursday’s rout. The VOLD was up and strong most of the day, but given the holiday-type trading there was little to read into this. Volatility collapsed, put/calls were unusually higher but perhaps reflecting on the low VIX and the need for protection. Ticks were strong and green most of the day, bodes well for a rally continuation today.
The Dynamite
Economic Data:
- Monday:N/A
- Tuesday:Consumer Confidence
- Wednesday:Fed’s Beige book
- Thursday:GDP second estimate, Q1/2024, jobless claims, adv retail inventories
- Friday:PCE price index for April, Chicago PMI
Earnings this week:
- Monday:N/A
- Tuesday:BOX, CAVA, JOYY
- Wednesday:ANF, CHWY, DKS, AEO, A, HPQ, CRM, NTNX, OKTA, PSTG
- Thursday:KSS, FL, DG, BBY, BIRK, BURL, COST, DELL, ZS, MRVL, ULTA, ZS, NTAP, VEEV
- Friday:GCO
Fed Watch:
Several Fed speakers out this week talking about monetary policy and the economy. Most of them are on Tuesday, it seems the committee is anxious about the data being more ‘correct’, since many would like to be in rate cutting mode. However, it’s just too soon for it to happen. We may have some clues this week, the next meeting comes in three weeks. Goldman Sachs believes the next rate move is a cut but not until September at the earliest.
Stocks to Watch
Inflation – Friday is a big report with the PCE coming out before the open. This is a favored report of the Fed and will give us a glimpse on how prices fell or rose in April. The CPI said prices were stabilizing, we’ll see if this report confirms it.
Gold – The metal made new highs this past week but backed off sharply, as did silver. This could be a week of tight consolidation here, perhaps a hint at the next breakout move.
Salesforce – This name reports earnings this week and if recent tech earnings are any clue, this one should be pretty strong. However, some of its competitors like Datadog and Workday fell flat on their faces. Last quarter the company rocked a big number and set record again, if that happens one more time this stock is easily above $300.
