The Fuse
What are futures doing?
After a tight day of consolidation markets are making an effort to go positive. ES futures are gaining some ground as is the Nasdaq, which is again creeping up on 30K. Perhaps some economic data this morning will push the SPX 500 and Nasdaq higher.
News
More light gains in Europe as the STOXX rose up a paltry .1% with gains in Germany. The FTSE was flat as was the US dollar, gold higher and within sights of all-time highs, silver gaining ground as well. Crude oil is modestly higher, yields are up in Germany but down in the US. Japan was off the prior day but lat night gained .8%, Shanghai also up .3% but Hong Kong down .8%.
Volatility
The VIX remains low and still shows complacency in the marketplace, but that is simply a condition and not a signal. A lack of news to drive stocks higher or lower is the condition but earnings remain robust.
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Interest Rates
Yields on the long end of the curve are catching a bid, perhaps a nice rally following the gains in US markets overnight. 2/10 spread has been climbing of late with pressure on the long side of the curve. High yield spreads remain very tight, 30 year yields still in an uptrend which is bad for mortgages. Fed funds futures now about a 50/50 chance of a hike in September.
Earnings
A great night for earnings, strong numbers from CoreWeave, Cava and Lumentum along with SuperMicro. This morning we have Nebius, Brinker then later Cisco, Coherent, Cerebras, Harmonic and Infleqtion.
Events
Tough day for the bulls as there was little to no bid all day long. That is not too surprising after markets have rallied so much over the past two weeks. We don’t really like it when the market pauses or stalls but it is a healthy sign for the next leg up, should it occur. The dip buyers need a chance, this is probably it.
Breadth
We saw positive breadth but barely, this indicator is teetering on a sell signal. There is just no energy from the markets when breadth is weak, something we got used to for most of July. Eventually that will change if the trend is going to move forward. Oscillators are still mixed, new lows are starting to creep up to new highs again.
Volume
I’m not sure what is behind the weak volume here. Another day of erratic price action and low turnover, hence stops are being hit all over the place. That is the only way for a market maker to make any dough in this market. I suspect with some earnings and data this week we may see a pickup in volume but I am not holding my breadth, maybe when Jackson Hole Conference is going on.
Support Levels
Not even a weak day takes the markets down to support. It would be nice just to get it over with, but then again the moving averages are coming up fast and if there is more sideways action that means a lesser chance of a substantial correction in the short term. Solid support for the SPX 500 at 7700 and then 7620, which may feel bad but would be a good setup and test of support.
The Internals
What’s it mean?
A day wasted by the bulls and even the bears. Want to see lethargic, just look at the pathetic VOLD. Poster child for weak market action. The VIX barely moved also, ticks were evenly distributed as traders just played musical chairs. ADD and ADSPD right down to the zero line. Hopefully more action after the CPI is released today.
The Dynamite
Economic Data:
- Wednesday:CPI, monthly budget
- Thursday:Jobless claims, PPI
- Friday:Retail sales, business inventories, consumer sentiment
Earnings this week:
- 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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