The Fuse
What are futures doing?
A quiet morning so far with mixed indications as the SPX 500 and Nasdaq pointing higher but the Industrials a bit lower. That can change drastically of course, the trend in markets is higher and can pull up any slacker very quickly.
News
Flat trade in Europe as the STOXX was unchanged, FTSE was down .1%. Crude oil price are up more than 1%, gold slightly lower after touching 4,400 but silver is rising nicely. Yields are steady, Japan climbed 2.1%, also nice gains in China with Hong Kong higher by .9% and Shanghai up .7%.
Volatility
VIX showing high complacency in markets but is giving it back a bit this morning. The volatility index pushing of the low Friday reading under 15% and rising by nearly 5%, nothing too worrisome yet but always a concern when traders are too bullish as they are now.
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Interest Rates
A little jostling in the fixed income market with yields up a bit across the curve. 2/10 spread is widening out, 30 yr treasuries are trying to run back down towards 5%. High yield spreads are tight as these remain nicely bid, fed futures now see less of a hike chance after the weak July jobs report.
Earnings
A nice assortment of earnings this week as we move into phase 3 of earnings season. CoreWeave, Cava, Cisco, Lumentum, Coherent and Applied Materials are the top names on schedule. We’ll hear from smaller tech names, retail, and restaurants as well as gold and other metals.
Events
Rounding out a very solid week for the markets was a strong showing on Friday with good price action and a broadening out of the rally. After moving well ahead of the old highs at 7,620 the SPX 500 is on much firmer ground. The followthrough days are important as that sets up situations where dip buyers may come out and buy those pullbacks.
Breadth
Pretty good breadth by recent standards has the bulls a bit more enthusiastic. Oscillators are both back in positive territory again, the NYSE ever so slightly. New highs crushing new lows again as this indicator is firmly bullish. We’ll be watching the breadth over the coming days.
Volume
Only the SPX 500 and IWM with accumulation days on Friday, and that is fine with the indices both closing at all-time highs. The turnover this week has been good not great, which keeps the wall of worry up and the FOMO attitude alive. You would not want to have markets reaching these levels with very strong turnover, that might signal the end of the rally.
Support Levels
Did the bulls ever have a stronger week following a good finish? Remember the prior week with heavy buying right after the Fed decision, and then an entire week of buying followed. That is impressive. Support for the SPX 500 lies at the old highs of 7620, IWM at 297.5 and the Nasdaq at 29,100. Those numbers are far away so we could have some sort of pullback to those levels to test, it may feel awful and quick but necessary.
The Internals
What’s it mean?
In a theme following the early part of the week, the internals lit up like a Christmas tree Friday with the VOLD pushing higher and finishing on its highs. ADD and ADSPD actually had strong days too, the VIX sank into oblivion. Ticks were mostly green as buy programs dominated, and even put/calls headed lower. All bullish and in line with the price action.
The Dynamite
Economic Data:
- Monday:N/A
- Tuesday:NFIB optimism, existing home sales
- Wednesday:CPI, monthly budget
- Thursday:Jobless claims, PPI
- Friday:Retail sales, business inventories, consumer sentiment
Earnings this week:
- Monday:CEVA, B, MNDY, CECO, RDNT, BTDR, RKLB, ASTS, PLUG, HIMS, NUS, AAON
- Tuesday:SE, ONON, CAH, RXT, HUYA, SMCI, CRWV, LITE, FLY, CAVA, BGS, FNV, ABSI, QUIK
- Wednesday:NBIS, ARCO, BETA, EAT, TRMB, AMCR, LQDA, BWAY, WYFI, CSCO, INFQ, COHR, CBRS, ENVX, ALLO, HLIT, BSEM, STAA
- Thursday:MLCO, LUNR, FRMI, AIT, JD, BLSH, ASN,D TPR, XE, AMAT, FIGR, BLOB, BEAT, SPRY, WKHS, TMC, GEMI
- Friday:OTLK, PAVM, LNZA, LFWD, ACXP, TMS, SIND, RMIX
Fed Watch:
There is no fed meeting until mid September but many are pointing towards the Jackson Hole Conference in a couple of weeks as a place that might shift sentiment. Often times the Fed Chair makes a speech that telegraphs policy, it has been used in the past as a transmission method prior to the next meeting with potential market implications.
Stocks to Watch
Volatility – The VIX is below 15%, which on its own is not a problem but indicates market players are rather complacent. If that continues there will be some price to pay down the road. Summertime though is often when we see a lack of volatility.
Small Caps – No question the small cap Russell 2K is going to benefit if rates fall further. That could be the signal after a weak July employment report, but one number does not make a trend. There could be very good reasons for the drop in payrolls.
Breadth – We have been watching breadth closely over the last six weeks, it has really been poor but now with a price breakout perhaps those on the sidelines will step up and start buying.
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