The Fuse
What are futures doing?
Small rally in the equity futures this morning as we continue to see a bit more consolidation after the very strong run last week. A tight move sideways is often healthy and needed to reset the trend, even a slight down would not be horrible.
News
Modest gains in Europe with the STOXX up .1% led higher by gains in France. The FTSE was flat, so was the US dollar index. Gold higher by .5%, silver gaining some ground. Crude oil is flat. Yields are up in Germany and the US 10 yr, while Hong Kong fell 1% and Shanghai off .8%.
Volatility
VIX continues to show complacency and that could be worrisome if the buyers stop making purchases. As of now, the momentum of the market is very strong and continues to push markets higher.
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Interest Rates
Seeing a modest rise along the term structure this morning as fixed income investors position themselves carefully for the upcoming inflation reports. Gold is seeing a sharp rise of late, probably due to the fact the Iran war is not over and inflation remains persistent. 2/10 spread is stable while high yield is right near all time highs. Fed futures about 50/50 odds to see a hike next month.
Earnings
Strong earnings from SE this morning, last night HIMS with a beat but weaker guidance, ASTS and RocketLab down on losses. Tonight SuperMicro, CoreWeave, Lumentum, Cava, BGS then tomorrow Nebius, Beta, Brinker, Trimble, Liquidia, and Arcos Dorado.
Events
Nothing wrong with a little give back in terms of price and volume. Just as long as the primary trend holds and not much of the gains are given up. A sideways consolidation is common after such a large run up and we could have a few more days of this to come. Economic data is out that may be relevant to monetary policy in the short term, but we have mostly seen earnings taking the lead.
Breadth
Breadth was weak and basically gave back the gains from Friday. That is a bit disappointing, we have not had many days when the market has strung together consecutive up sessions in breadth. Oscillators are still mixed with the NYSE back around the flat line but the Nasdaq still in positive territory. With poor breadth it is rather striking to see new highs ripping higher vs new lows once again.
Volume
We are in the dog days of summer and August is notorious for very weak volume prints. Such was the action Monday as the indices barely budged and turnover was weak. However, with some important economic data due out Wed/Thur and some fairly big earnings to come, that make all change. We are about midway through the quarter and earnings are looking quite good so far.
Support Levels
I think after this last big run the indices are due for a moderate breather, at least to allow the dip buyers a chance to get involved. Many (myself included) would look to the 20 ma as a place for dips to be bought, but for now the 10 might hold first on support, that is 160 points down currently on the spx 500 but that ma is moving up quickly each day. The Nasdaq 10 and 20 are right together, call it 28,805 or so, about 4% lower. A drop there will feel like death but promises a chance to reset.
The Internals
What’s it mean?
Nothing to followthrough on from Friday’s very impressive internals. In fact, the Monday internals were very weak and showed it with very red ticks, heavy sell programs all day long. VOLD was a non-factor, the ADD very poor while put/call started to rise again. The VIX, which had been lower rebounded nicely on Monday. Nothing burger but certainly shows buyer fatigue.
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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