The Fuse
Equity futures are up modestly today but off their lows as sellers step in taking profits on overnight trades. As we start the new month and quarter of business the SPX 500 stands higher by 10% in 2024, a terrific start following a strong 2023. In fact, the gains so far this year are about half what we saw entirely in 2023! Small caps continue to impress and are making a bullish run, the IWM is not something you want to fight at this point. Dip buyers are ever present.
Interest Rates are inching up this morning as bond traders back off a bit following the long weekend. Strength in gold and some weakness in PCE have bond traders a bit concerned the Fed is going to sit on rates for even longer. Some are now questioning whether a June cut is going to happen. The market needs to come around to the Fed’s way of thinking.
Friday’s news with the in line PCE number will now be traded today. Further, more of the same language from Chair Powell on Friday has market players breathing a sigh of relief. March jobs numbers will be released later in the week and might cause a bit of tension. Volatility is rising this morning after getting whacked before the holiday (normal). Gold is up very strong again, more than 1%
Earnings reports are pretty light this week but as we kick of the second quarter a few names trickle in. today we have PVH, later in the week LEVI, BB, CAG and Acuity Brands.
Nothing like new highs in the indices to get everyone’s juices flowing! That happened this week, also a new weekly closing high for the SPX 500 and Dow Industrials. The Nasdaq is close. The big story of course has been the strong performance from small caps. The IWM was up a scorching 4.4% this past week on good volume. We finally saw this index respond with some big moves, which means a much broader rally is happening.
Breadth was fairly strong at the end of trading Thursday but was much better earlier in the session. Some good-sized sell orders kicked in late in the day to knock down the breadth figures, but a positive day is still constructive when markets are hitting new highs. The MC oscillator is in positive territory still but not overbought. New highs continue to expand over new lows.
Volume was pretty strong Thursday given the pre-holiday session. We had a big expiration last Thursday with monthly, quarterly and weekly options all coming off the board. This heavy volume caused quite a bit of volatility in the last hour of trading, but the range was still quite small. The new month is likely to give us more of a read.
We’ll stick with the support on the SPX 500 at 5,200 for now. If we suddenly get overbought then we might have to adjust the support area.
The current path of the market remains higher, and with earnings season coming up quickly perhaps a bit more thrust forward if earnings/guidance are positive.
The Internals
What’s it mean?
We’ll point out the ticks today, seeing a heavy dose of red on the screen would not make the bulls feel better. VIX rose modestly but the VOLD was up strong, meaning good volume bars all day long to the upside. ADD was off the highs, notable as the TRIN was also lower (bullish). Next week may see the internals re-align with the indices.
The Dynamite
Economic Data:
- Monday:ISM, Construction Spending
- Tuesday:JOLTS, Factory Orders
- Wednesday:ADP Employment, ISM Services
- Thursday:Jobless Claims, Challenger Job Report
- Friday:March Employment Report, Consumer Credit
Earnings this week:
- Monday:PVH
- Tuesday:PLAY, PAYX
- Wednesday:LEVI
- Thursday:KRUS, LNN, LWW, RPM
- Friday:GBX
Fed Watch:
Chair Powell with some comments last week basically reiterated what he said the prior week, and that is the data will tell the committee how to proceed. To be sure, the PCE data released on Friday was in line and rather friendly, as it met the committee’s expectations. They are wanting to see more data though and that requires a couple more months. The higher rates on the short end have been working.
Stocks to Watch
Volatility – The VIX often pulls down in front of a long weekend and rebounds after traders return. We’ll see if that pattern holds.
Equity Futures – No response Friday following Chair Powell’s comments and the PCE inflation data, but we’ll see how it goes early in the week.
Apple – Remains an enigma, plenty of news around this name but we often see buyers come to the rescue in times of distress, like now. A big tell on the market.
