The Fuse
What are futures doing?
SPX futures are rallying again, working to build on the last two days as traders start the new month up. August is often a time of greater volatility, the markets do look vulnerable to a pullback some time this week, we’ll have to see how things go.
News
Only modest gains in Europe as STOXX rose up .3% on moderate turnover. France and Germany had very strong gains above 1%, FTSE was down slightly. Gold and silver are quiet while crude oil is getting pounded again, below $80. Yields are declining sharply, Bunds down 5bps and 10 yr US treasury yields off 4bps. In Asia Japan was off .9% Shanghai down .6% but Hong Kong higher by .4%.
Volatility
VIX is telling the market, ‘fine go ahead and make a run to new highs’. That would be for the industrials and the SPX 500, which are very close to it. However, with VIX under 16% it is a dangerous time not to have protection.
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Interest Rates
Yields are coming down as once again the war premium is being faded. The term structure is working lower across all maturities, the 2/10 spread is declining. Spreads on high yield a tighter again but not at all time highs, so there is room to. rise. Fed funds futures seeing a 63% chance of a hike in September and 40% chance of a second hike in December.
Earnings
Another very heavy week of earnings with Disney, McDonalds, AMD, Caterpillar, Palantir, Lilly and SpaceX for the first time. Far more retail and consumer-related names this week.
Events
We could say that was good followthrough after Thursday’s monster session. But the internals were only so-so, and that leave the markets vulnerable again to some downside. Even late Friday some word about more bombings in Iran helped to dump the SPX futures a bit after the close. This vulnerability is playing out with lower turnover and less conviction as the markets right near all-time highs. Maybe somebody doesn’t want to be a part of that.
Breadth
Another day of poor breadth as this indicator could not string two up sessions in a row. Oscillators are still negative, the Nasdaq spent nearly the entire month of July in the red, that is remarkable. New highs though weaker than new lows, this indicator soon may be on a sell signal.
Volume
Good volume across the board for the indices but only the Industrials with an accumulation day. That leaves the markets a bit vulnerable but could certainly be a sign of exhaustion, too. With the markets not moving too much lower there is a chance for bigger volume moves like Thursday to gather some momentum.
Support Levels
That bounce on Thursday was fierce and took out many of the short sellers looking for more downside. However, the range is still in place, the SPY could not get a close above 750 again while the Nasdaq remains below its 20 day ma. Was this a bear market rally, or just a move back into the chop zone? Probably the latter, but plenty of earnings on tap to test the theory.
The Internals
What’s it mean?
Internals again very uninspiring, as the VOLD range was very tight and finished weaker, the ADD managed to move back up after an early drop but looks pathetic, VIX did move down and remains bullish for markets, but in a bad spot being under 16% again. Ticks were evenly distributed with some buy and sell programs throughout the day. New month here, we’ll see if the same old lethargy remains.
The Dynamite
Economic Data:
- Monday:Manufacturing PMI and ISM, construction spending
- Tuesday:Trade, JOLTS, factory orders
- Wednesday:ADP, services PMI, services ISM, fed speak
- Thursday:Jobless claims, productivity and costs, trade
- Friday:July employment report, wages, unemployment rate, consumer credit
Earnings this week:
- Monday:MAR, SRAD, TGTX, AVA, ABTC, ALX, CGEN, PLTR, STRL, CLX, WHR, JAZZ, VRTX, SNAP, ON, TKO
- Tuesday:PFE, CAT, MCD, W, HUT, WIX, ENLT, ET, MRK, AMD, SPCX, ANET, ALAB, ZETA, OPEN, BKNG, KTOS, ALGT, HL
- Wednesday:LLY, SHOP, UBER, DIS, DIBS, RIOT, CRCL, BLMN, U, NVO, SNDK, WDC, APP, ELF, TTMI, MELI, RDW, AXON, BYND, ALB
- Thursday:COP, QBTS, DDOG, CELH, HIMX, DNOW, FISV, VTRS, LNG, DKNG, ABNB, AAOI, TXG, RGTI, TTD, INOD, RCAT, MP
- Friday:OKLO, VST, TTOW, PPL, WEN, UAA, ASIX, ACMR, CYD, CGC
Fed Watch:
Fed policy remains in flux, and while the committee did not move rates this time around there is a good chance September is the move, if inflation does not cool down on its own. Chair Warsh was adamant about bringing inflation, others on the committee as well but action speaks louder than words.
Stocks to Watch
Semiconductor Names – With so much volatility around these companies it seems everyone is worried about the end of AI coming soon, but as we heard from the Mag 7 names that is hardly the case. Watch for AMD, Sandisk, Western Digital this coming week.
Oil prices – If this war continues, now in its 6th month there could be another spike in crude up towards $100. The Iranians are not giving up easily, they seem to have become an expert in being bombed. Oil prices will rise if the Strait is in flux.
Industrials – A good week for the Dow 30 and now some big less tech-sensitive names report this coming week like Disney and McDonalds. These charts are horrible but maybe the bar is low enough.
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