The Fuse
What are futures doing?
Equity futures are trying to go positive on this first day of July. We may see a bit more selling early before the bulls arrive.
News
Stocks fell in Europe, the STOXX off .4%with the FTSE down as well. Dollar index rose .2%, gold was below 4K but has bounced back, silver down as is crude. Seeing yields climb in Germany, steady in the US. Japan gained .6%, Shanghai up .4%.
Volatility
Some volatility here after a big crush in vol on Tuesday. We could see more volatility selling after the labor report is released on Thursday morning.
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Interest Rates
As the market is open we have yields rising a bit across the curve, 2s and 5s up slightly but large moves up as the curve steepens on the long end. High yield is riding along with equities, slightly lower while fed funds futures are locked in.
Earnings
Horrific move by Nike even as they had a beat on the top/bottom line. It will take several quarters to fix that mess. General Mills and Factset with a solid quarter.
Events
Good finish for the last trading day of the month and quarter but not on the highs of the day. It sure seemed the bulls were getting tired at the end of the session or it was simply a bit of profit taking from a strong couple of days. We’ll see how the first trading day of the month goes.
Breadth
Another day of wretched breadth but the market action did not seem to mind it. Nothing horrible, 12-14 on the a/d line as the oscillators remain positive. A good rout of the bears would be just what the doctor ordered for the bulls. New highs continue to trounce new lows.
Volume
Good turnover on the day with pretty decent volume in the IWM and QQQ, which led the markets higher. We did not see that happen on Monday but this was a good turnaround. Look for volume prints to start weakening a bit into the end of the week but perhaps get cranked up after the jobs report Thursday morning.
Support Levels
Stocks continue to make higher highs, higher lows and that tells us something about the character of the bulls. They mean business. Any dip like we saw early yesterday and even Monday is a signal to buy, no questions asked. Support for the SPX 500 is at 7300 but 7500 is resistance (where it closed).
The Internals
What’s it mean?
I sound like a broken record, but the internals are mixed again. Good action in VIX, which dropped sharply and put the markets on a buy signal. Ticks were super green most of the day until some sell programs hit late in the day. PUT/CALLS fell sharply again, ADD just very weak. Hard to get a read on these internals here.
The Dynamite
Economic Data:
- Wednesday:adp, Kevin Warsh speaks, ISM, Final, construction spending, auto sales
- Thursday:June labor report, wages, factory orders
- Friday:Holiday
Earnings this week:
- Wednesday:GIS, FDS, UNF, MSM, FC, BSET, BGX
- Thursday:LNN
- Friday:Holiday
Fed Watch:
Fed futures are probably more hawkish than the FOMC. On the surface, perhaps the committee is waiting for more data to get a firm opinion of monetary policy, but futures markets see a couple of hikes coming this year. Perhaps Kevin Warsh will have something different to say on Wednesday.
Stocks to Watch
Volatility – The VIX has been stagnant of late, just hanging around the 19% level but lacking any sell catalyst the fear index could drop sharply this week, with only four days to trade and an 3 day weekend coming.
Micron – We watched it last week, this memory supplier kicked butt last quarter and guided significantly higher for the next year or so. It was impressive, the stock really ripped hard on Thursday but faded some Friday. We’ll see if buyers continue to step up.
Bonds – We have to always keep an eye on rates, the bond market is something of an enigma. It will respond this week to a speech by Kevin Warsh and the labor report, looking for about 120K expansion of jobs with rate and wages steady.
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