The Fuse
What are futures doing?
Equity futures are higher this morning as the easing from the war starts kicking in. With the back to back rally days it seems as if stock traders are back in the game again, just in time for earnings season. March CPI out this morning.
News
Stocks across the pond continued to rally, up a small fraction with the STOXX higher by .1%, FTSE added the same amount. Dollar index also up .1%, oil is flat, gold is down slightly as is silver. Yield are rising, german bund yields up 3bps, 10 YR US treasury yields up 2bps, while in Asia Japan gained 1.8%, Hong Kong and Shanghai up modest amounts.
Volatility
The VIX has been cut down to size over the last few sessions and is now confirmed with a downtrend. Of course, it will take several more days to dismantle the uptrend the VIX had traveled since late December, but the market bulls have control now.
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Interest Rates are on the move this am, mostly higher which is reflecting the inflation worries. CPI today may see higher levels of prices on the consumer level, not to the taste of the Fed. High yield remains well bid as spreads are tight, not indicating much economic difficulty here. The five year is now below 4% which is a key level, the 2 year at 3.77% now, off the recent highs and closer to fed funds rate. Market is not seeing much change in policy until 2027.
Earnings are sparse this week but we’ll hear from Levi, Delta, Constellation Brands, WD-40 and a few others. Banks/financials kick things off next week.
A good followthrough day after a fantastic day leads us to believe there could. be more upside to be had. Of course, the news could break in favor of the bears at any time and that could put pressure on the markets. Yet, this is now earnings season and there is a often a bullish bias when companies report, so seasonality is with the bulls for now.
More good breadth as this indicator is now on a buy signal. That is the good news, but the bad news is the oscillators are wildly overbought, which could become a problem if profit taking becomes a short term fad. New highs jumped again and are on the cusp of a buy signal, indicators are slowly turning up to meet the bulls’ challenge.
We mentioned the mediocre turnover from Wednesday’s huge advance, and yesterday it was even worse. No question the buyers were tired after hitting the buy button all day on the 8th, but for markets to go higher they need more liquidity, and with that heavy volume to the upside to confirm there is some conviction. Else, the rug can be pulled quickly.
Give the bulls some credit, there was a chance the markets would retreat more, but the pullback was bought up easily, the dip buyers taking advantage of the early down move. This sets the stage for another run at 7K for the SPX 500, we’ll see if it holds up there or not this next time around.
The Internals
Nothing impressive with the breadth figures but the put/call and VIX were buried, sentiment is turning bullish again. Ticks were mixed but mostly green on the day, the VOLD barely budged while ADD was mildly positive.
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The Dynamite
Economic Data:
- Friday:CPI, factory orders, consumer sentiment
Earnings this week:
- Friday:LOT
Fed Watch:
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Stocks to Watch
Crude Oil – Again, the commodity needs to be watched closely here but it is poised for a breakout move, which will be awful for the economy over the long term.
Nasdaq 100 – A strong week for tech stocks as they led the gains on Tuesday’s explosive rally. Some believe they have bottomed but we want more evidence to the point.
Financials – A week out before reporting earnings, this group is trying to break free of the bear clutches. No doubt the selling has been intense as the last quarter was not too kind to the banks. Will they repair the damage this week?
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