The Fuse
Equity futures are jumping around a bit this mornings but are flirting with the flat line. Stock futures were volatile last night but are hoping to push forward as we close in on the end of the first quarter for 2025.
Interest Rates are pushing up a bit as bonds are sliding. This has been a trend of late and has often stymied the markets from moving naturally higher. If yields are up that is a ‘check’ on the stock market, which appreciates lower rates. Fed funds futures are now seeing less of a chance for three cuts in 2025.
Stocks are flipping around this morning with a bias to the downside. In Europe stocks were slightly lower, the dollar off a fraction. Crude oil was modestly higher as was gold and silver, copper continues its record run while other commodities move higher.
German 10 yr bund yields were up slight, 10 yr US treasury yields flat. In Asia we saw strength in Japan and Hong Kong, Shanghai was flat.
Earnings from GameStop last night were pretty strong, later today we’ll have Chewy and Paychex.
The markets got their followthrough day but it was a challenge. No question the momentum is shifting bullish here, but the big finish might be later in the week. Why is that? Basically, there has been good action with volume over the last few sessions but the bulls may be getting tired. That happens, but as we move into April the clouds over the market may be clearing.
After a couple of nice breadth sessions we finally had some weakness. That is fine and pretty healthy for the uptrend to continue, in fact poor breadth days bring out the doubters. That enables the wall of worry to rise up, and the bulls like that for a continuation of the rally. Oscillators remain positive, new highs are starting to expand but this indicator is not yet on a bull signal.
Markets were mostly higher on Tuesday but volume trends were weak. No surprise really, a few short covering rallies leftover from last Friday, letting the markets reset. We might see some higher volume levels over the next few days especially on the last day of the quarter which is next Monday. Good volume if the market is rising is bullish.
We are now looking for levels the stock market will hit resistance. Clearly the SPX 500 is and the Nasdaq are the strongest of the indices at this point, the 50 day moving average on these two is the next objective. The Nasdaq, for its part closed nicely above the 200 ma, looking for a followthrough day here.
The Internals
What’s it mean?
Not much to get excited about with the internals yesterday. Breadth was weak, as we see with ADD and VOLD, notice the weakness in ticks, red most of the day. VIX did decline again, as this indicator is bullish. Put/calls are not signaling bullishness though, we’ll be watching this one carefully.
The Dynamite
Economic Data:
- Wednesday:Durable goods, St Louis Fed President
- Thursday:Jobless claims, GDP revision, trade balance, retail/wholesale inventories, pending home sales
- Friday:income/spending, PCE, consumer sentiment
Earnings this week:
- Wednesday:DLTR, CHWY, JKS, PAYX, CTAS, MVIS, WOOF, VRNT, JEF, HBF
- Thursday:WGO, SACH, IPHA, LULU, BRZE, KULR, OXM, SKYH
- Friday:IPA, SLE, ZSPC, LIQT
Fed Watch:
The Fed came and did their thing last week, deciding to keep rates where they are and not offering too many clues as to their intentions. They did talk about starting to put an end to the QT program, reducing their sales of bonds to prevent a major liquidity crunch. As or inflation, Chair Powell believes tariffs will be a drag on the economy and bring up inflation, at least in the short term. A couple of fed speakers out this week talking up the economy.
Stocks to Watch
Banks – Financials have started to show better relative strength. No doubt they will be the leaders into the new month as earnings season gets underway in April. Top of the charts is JP Morgan but we will also be watching Goldman, Morgan Stanley and Citigroup as those names rally to the 20 day moving average.
Market Volatility – The VIX continues to be the story of late. The fear index has been on the rise lately and remains stubbornly high. However, release of the Fed notes last week pushed volatility sellers to work the VIX downward. Uncertainty over tariffs keeps a bid in the VIX though, we’ll see how much movement in the markets happens./span>
Tariffs – With the April 2 deadline looming towards across the board tariffs on other countries, we still have some uncertainty whether these are going to take hold or not. That is causing some angst but when the deadline passes (assuming it is not extended) we will have more clarity.
