The Fuse
What are futures doing?
Stocks are looking to rally on today, pushing the markets even higher as many are speculating the bubble continues to grow. You know what I think: WHO CARES? Make your money when you can, not when you have to. There is nothing wrong with a bubble, just manage your risk properly!
News
Modest rise for the STOXX in Europe overnight, the index rose .3% on moderate volume. France and Germany rose up nicely, the FTSE was flat, so was the US dollar index. Crude oil is quiet, so is gold but silver is down a bit more. German bund yields fell, in Japan the Nikkei fell 1%, Shanghai off 1.5% but Hong Kong with a slim gain.
Volatility
Is the rising VIX a problem? Some may believe so but then again the fear index remains below panic selling levels. It is below 18% and the term structure points up, so that is bullish. There are other things to worry about but this is not one of them yet.
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Interest Rates
Rates continue to rise, the 30 yr above 5% for the first time in awhile. In fact, Wednesday’s auction finished above 5%, first time since 2007. That is quite a statement but looking at the recent inflation readings it is understandable (very hot inflation on CPI, PPI)>. 2/10 curve continues to tighten. Curiously, high yield is not participating as spreads start to widen, fed funds futures don’t see a rate move happening for months.
Earnings
Spectacular earnings from Cisco last night, a beat and raise into the end of 2026. This big networking company is hitting on all cylinders, so this move to extreme highs is probably not a surprise. Later tonight big equipment company Applied Materials along iwth NU, Figma, Beeline, Blaze, Rumble and a few smaller names.
Events
Not even higher inflation can stop this stock market freight train. The bulls mean business here, and even the internals somewhat cooperated. The strength has been with the Nasdaq, the Mag 7 and others flexing their muscle. The QQQ and SPY hit new all time highs again, even with higher PPI on the table. Clearly the price action is king, and don’t get in the way if you want to remain standing.
Breadth
Curiously, the bulls did not get much help from breadth statistics. The NYSE was down sharply, 16-10 negative and probably pulled down by weakness in the small caps. Oscillators remain below zero, and pushing towards a sell signal. That might only help to drag the indices down modestly, but it matters in the long run. Breadth acts like an anchor in the water, not floating but pulling down. New highs crushing new lows again.
Volume
Turnover was weak yesterday, so no accumulation day counted for the SPY or QQQ. That’s fine, the price action is very bullish and really only needs volume support if there is a worry over the price structure. We saw good turnover from tech stocks though and strong price action to boot. We may see better volume today as retail sales takes center stage.
Support Levels
We are going to consider that Tuesday pullback enough to test support. That was quite rally by the markets yesterday, with good (not great) statistics as market just pushed higher all session long. No doubt the market remains intermediate overbought, but in light of the rally the indices could rally a bit more to that 7500 and 30K resistance on the SPX 500 and Nasdaq.
The Internals
What’s it mean?
Stocks managed to rally yesterday without the help of the internals, which was the case on Monday as well. Is that a concern? No, not yet as the price action matters most. It is always useful to have more support by the internals, but it’s not a requirement. VOLD and ADD were weak but price action was good. We can blame small caps and the industrials for the weak breadth performance. VIX was slightly lower, not a factor while put/calls dipped. Ticks were mostly red to start but flipped green end of day, mostly even.
The Dynamite
Economic Data:
- Thursday:Retail sales, import prices, jobless claims, biz inventories, lots of fedspeak
- Friday:Empire state, industrial production, cap utilization
Earnings this week:
- Thursday:ONDS, KLAR, BM, LUNR, BLSH, IMSR, SBC, YETI, SUNI, VIK, NU, FIG, AMAT, NM, RUM, BZAI, BLNE, BRFM, COOK, RSFM
- Friday:SPRY, PAVM, RMIX, SACH, SLE, AZ, ALK, RBC
Fed Watch:
The Fed will have plenty to chew on this week as the data is going to likely point to higher inflation overall. That is reflective of higher energy prices, which will hit the consumer hard in the wallet. It is possible the committee will look through the data but if it lasts quite a bit longer there will be necessary adjustments, like a rate hike. Last full week for Jay Powell as Chairman.
Stocks to Watch
Semiconductor Stocks – This group has been on fire lately and could really ignite the markets higher. Even a modest setback could trigger dip buyers to engage.
Oil/Energy – We continue to watch the developments in this Iran War. It seemed last week there was progress towards a resolution but oil prices continued to rise following. More good news could send oil down to the 80’s.
Cisco Systems – The big networking company reports earnings this week and it could be a blockbuster.
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